Oil must rise above $50 a barrel if the energy sector is to attract the investment needed to build enough capacity to meet future demand, US consulting firm Oliver Wyman said in an annual energy outlook.

"Oil does not work at $50 a barrel. The price needs to be at least $65 a barrel, or the industry is not going to see the investment required to offset impending decline," Francois Austin, head of Energy Practice, said in the group's second Energy Journal.

"Change has become the new constant in the energy industry, with continuing pressure from record low oil prices, an excess of supply and not enough global demand," Austin said.

Oil has fallen to around $40 a barrel from close to $80 in late 2014, when the Organization of the Petroleum Exporting Countries said it would not cut production to help balance supply and demand.

Opec, led by Saudi Arabia, has seen its global market share eroded by a boom in non-Opec production over the past few years, mainly from the US shale sector and Russia.

Low oil prices have shut off higher-cost production and forced major refiners to slash spending, cut jobs and shelve projects. Oil-reliant governments have been forced to impose painful social reforms as they struggle with dwindling revenues.

The Oliver Wyman report said the energy industry would need new strategies to overcome significant challenges, not just from low prices, but changes to the regulatory and environmental frameworks.

"Unprecedented shifts are forcing oil and gas companies, utilities, governments, investors, regulators and even consumers to rethink basic assumptions that have guided the energy sector for decades worldwide," the report said.

"To stay ahead of the profound transformation under way, business and government leaders must forge new strategies, operating models and risk mitigation tactics."

The report forecasts demand growth at around 1 million barrels per day.

The report echoed the view of the International Energy Agency that oil prices below $40 for an extended period would increase global dependence on the Middle East, home to some of the world's lowest-cost producers.

"While some niche assets and conglomerate operations may be able to endure, many smaller mature assets are headed for decommissioning unless significant cost-saving technology emerges. Regulatory efforts to foster cooperation and cut costs have had limited success so far," Austin said. – Reuters