IEA cut its crude demand growth outlook by 100,000 barrels a day for this year and next, as the Wall Street Journal reports.
The price of oil has risen over 30 percent since June to a two-year high of around $57 a barrel in NY trading amid evidence of stronger economic growth around the world.
"Solar is forging ahead in global power markets as it becomes the cheapest source of electricity generation in many places", said Fatih Birol, executive director of the IEA.
"A remarkable ability to unlock new resources cost-effectively pushes combined United States oil and gas output to a level 50% higher than any other country has ever managed", the IEA said on Tuesday.
Under its "New Policies Scenario", based on existing legislation and announced policy intentions relative to emissions and climate change, the oil price should continue to rise towards $83 a barrel by the mid-2020s.
"Using a scenario whereby current levels of Opec [Organisation of the Petroleum Exporting Countries] production are maintained, the oil market faces a hard challenge in 1Q18 with supply expected to exceed demand by 0.6m bpd followed by another, smaller, surplus of 0.2m bpd in 2Q18".
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OPEC also says that OPEC said inventories in developed economies declined by 23.6 million barrels in September to 2.985 billion barrels, to just 154 million barrels above the five-year average. "This is a continuation of the strong demand growth we are seeing in our short term oil market analysis", the report said.
Oil demand is now projected to rise by 1.5 mb/d in 2017 and by 1.3 mb/d in 2018, representing annual increases of 1.6 percent and 1.3 percent, respectively.
Crude has climbed lately to a two-year high around $57 USA a barrel in trading in NY, although it is not seen making much larger gains due to rising U.S. output.
Total energy demand is expected to have grown by 30 percent by 2040 and would be growing twice that without efforts to improve energy efficiencies.
However, even rapid growth in the electric vehicle fleet would be unlikely to have a substantial impact on oil consumption for passenger transport until the mid-2020s, it said.
Between 2017 and 2040 the IEA estimates that more solar power capacity will be added globally each year than any other source of energy, with an annual average increase of almost 70 gigawatts. Indeed, the IEA also suggests that demand for oil will remain supported by lower prices, going forward.