An increasingly tight oil supply will make Canada’s oil sands the single biggest contributor to net new global supply by the end of the decade, according to a report released today by CIBC World Markets.

In the report, CIBC World Markets notes that despite a near doubling in crude prices over the last two years, non-OPEC production failed to increase in 2005. This limited the total increase in global supply to less than 1 million barrels a day.

“Our study of 164 new oil fields and projects indicates that oil markets will become even tighter over the next three years if global demand continues to grow at its current pace,” says Jeff Rubin, chief economist at CIBC World Markets.

The study found that over 60% of the 3.6 million barrels of new oil production expected to come in stream in 2006 will simply offset depletion from existing fields like the North Sea and Kuwait’s Burgan. After depletion, new supply is expected to grow by less than 1.5 million barrels per day in 2006 and 2007, and by less than a million barrels a day in 2008.

The study also found that global conventional oil production seems to have peaked in 2004.

“All of the net increase in oil production this year is expected to come from non-conventional sources. While deepwater oil is the primary source today, we forecast that Canadian oil sands will become the single biggest contributor to incremental global supply by 2010,” notes Rubin.

With oil prices expected to average over US$70 per barrel this year, and limited market access to OPEC reserves, Rubin notes that Canadian oil sands may not only become one the world’s most valuable energy sources, but one of the few remaining still open to private investment.