The publication argued that the shale oil and gas revolution in the United States continues and that, by the the mid-2020s, the USA is projected to become the world's largest liquefied natural gas exporter and a net oil exporter by the end of that decade.
Another milestone will be reached soon after: By the late 2020s, the US - which only lifted its ban on oil exports in 2015 - will ship more oil to foreign markets than it imports.
"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.
US oil prices have risen above $55 a barrel recently amid geopolitical tensions overseas, supply disruptions and an anticipated extension of OPEC's production cuts next year.
The agency raised estimates for the amount of shale oil that can be technically recovered by about 30 per cent to 105 billion barrels. This sentiment comes in part on the back of rising USA oil output C-OUT-T-EIA, which has grown by more than 14 percent since mid-2016 to a record 9.62 million bpd.
The U.S. industry "has emerged from its trial-by-fire as a leaner and hungrier version of its former self, remarkably resilient and reacting to any sign of higher prices caused by OPEC's return to active market management", the IEA said.
"The scenario would see demand grow from 95.4 million barrels per day, in 2016, to reach 111.1 million barrels per day by 2040, with the global economy growing by an average of 3.5 per cent per year during that time". The world will use just over 100 million barrels of oil a day by 2025. But the expected increase would put the USA further into uncharted territory.
Nevertheless, U.S. shale output is expected to decline from the middle of the next decade, and with investment cuts taking their toll on other new supplies, the world will become increasingly reliant once again on OPEC, according to the report. Brent futures LCOc1 were down $1.24, or 2 percent, at $61.92 a barrel by 11:53 a.m. EST (1653 GMT), while U.S. West Texas Intermediate (WTI) crude CLc1 was down $1.16, or 2 percent, at $55.60 per barrel. OPEC says that the excess in the oil market overhang has fallen considerably and they are on target with their cuts.
If US production stays at current levels, the IEA said, and a trend towards adopting electric cars accelerates, prices could stay between US$50 and US$70 a barrel until 2040. The IEA delivered a surprisingly downbeat outlook for oil demand in its monthly market report, showing an expected slowdown in consumption that was at odds with a more bullish view from the producer group OPEC on Monday.