This forecast is down 50,000 bpd from the last one.
The report includes several caveats: While the USA will become a major exporter of light crude and refined products, it will remain a major importer of heavier crude oil that is used in many of its refineries.
"It is far too early to write the obituary of oil, as growth for trucks, aviation, petrochemicals, shipping and aviation keep pushing demand higher", said Fatih Birol, executive director of the Paris-based IEA. It kept its estimate for this year at 3.08 million bpd.
With big gains forecast in its output of shale oil, the United States is expected to become a net oil exporter by the mid-2020s, the IEA said, adding that the US will account for 80 per cent of the increase in the global oil supply to 2025, which will maintain near-term downward pressure on prices.
Amid these upheavals, Canada will likely remain a minor actor, its global plans dashed partially through self-restraint and rules, and also by its next-door neighbour who is upending global markets and disrupting Canada's plans to export oil and gas in the process.
"While other major companies continue to maintain a presence in oil sands operations, it remains an open question whether the exit of these companies will impact prospects for oil sands development over the longer term", the IEA said.
Some analysts even predict that with oil demand declining as EVs set to replace conventional fuel vehicles, oil price could plunge to as low as $10 a barrel over the next six to eight years.
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"Next year's demand growth will struggle to match this", the IEA said.
"Yet this is precisely what is happening as a result of the USA shale revolution - both for oil and for natural gas", the IEA said. Asian countries will become the biggest net importers of oil and gas, taking in 70 percent of imports by 2040 as their economies expand at a fast clip.
At the same time, the renewable energy sources will become more important.
"Using a scenario whereby current levels of OPEC production are maintained, the oil market faces a hard challenge in 1Q18 with supply expected to exceed demand by 600,000 bpd followed by another, smaller, surplus of 200,000 bpd in 2Q18", the agency said.
If planned pipeline projects come to fruition, the United States and Canada combined could export more than 700,000 bpd to China by 2040 - a drop in the barrel in the country's 15.5 million bpd demand.
After an upbeat performance last week, oil prices edged lower for a second day Tuesday.