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Don’t rush out to buy that new car just yet…

Global oil supply growth is plunging as an extended period of low prices takes its toll according to a new report from the International Energy Agency (IEA).

The report notes that while oil prices should start to rise gradually once the market begins rebalancing, the availability of resources that can be easily and quickly tapped will limit the scope of rallies – at least in the near term. However, the report points to the risk of an oil price spike in the later part of the outlook period arising from insufficient investment.

IEA Executive Director Fatih Birol warns:

“It is easy for consumers to be lulled into complacency by ample stocks and low prices today, but they should heed the writing on the wall: the historic investment cuts we are seeing raise the odds of unpleasant oil-security surprises in the not-too-distant-future.”

The report predicts that 4.1 million barrels a day (mb/d) will be added to global oil supply between 2015 and 2021, down sharply from the total growth of 11 mb/d in the period 2009-2015. The drop in supply growth comes as investment in new production dries up in response to the current glut that is pressuring prices. Global oil exploration and production capital expenditures (capex) are expected to fall 17% in 2016, following a 24% cut in 2015 – which would be the first time since 1986 that upstream investment has fallen for two consecutive years.

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