Oil is unlikely to return to $80 a barrel before the end of 2020, despite unprecedented declines in investment, as yearly demand growth struggles to top a million barrels per day (bpd), the International Energy Agency has said.

In its World Energy Outlook, the agency says it anticipates demand growth under its central scenario will rise annually by some 900,000 bpd to 2020, gradually reaching demand of 103.5 million bpd by 2040.

The drop in crude to about $50 a barrel this year has triggered steep cutbacks in production of US shale oil, one of the major contributors to the oversupply that has stripped 50 per cent off the price in the last 12 months.

“Our expectation is to see prices gradually rising to $80 around 2020,” Fatih Birol, IEA executive director, said ahead of the release of the report.

“We estimate this year investments in oil will decline more than 20 per cent, but, perhaps even more importantly, this decline will continue next year as well.

“In the last 25 years, we have never seen two consecutive years where the investments are declining and this may well have implications for the oil market in the years to come.”

Oil companies have grappled with the downturn and a “lower for longer” price outlook by slashing spending, cutting thousands of jobs and delaying about $200 billion in mega-projects around the world.

The IEA estimates investment has already fallen by 20 per cent this year. “In the next 10 years, even if oil demand growth were zero . . . just to increase production to compensate for the decline of existing fields, we need investment at the level of $650 billion,” Mr Birol told a news conference.

Higher-cost producers in Canada and Brazil, as well as the United States, are likely to fall victim to low oil prices faster than most exporters, but these declines could be offset by supply growth in Iraq and Iran. – (Reuters)