The International Energy Agency (IEA) has issued a warning for the global oil industry, projecting a shift in market by 2030. In its latest medium-term market report, Oil 2024, the IEA highlights a peak in oil demand growth and an increase in production capacity, leading to a considerable surplus.
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The IEA predicts that global oil demand will reach its peak at around 106 million bpd by 2030, up from just over 102 million bpd in 2023.
Demand in advanced economies is expected to fall below 43 million bpd by 2030, a level not seen since 1991, excluding the pandemic period.
Factors contributing to this decline include a transition to electric vehicles and a shift towards renewable energy sources.
Emerging economies in Asia, particularly India and China will continue to drive demand growth. The transportation sector in India and the petrochemical industry in China are expected to be huge contributors.
The global shift towards clean energy technologies and reduced reliance on fossil fuels is a major factor in slowing demand growth.
The report highlights an increase in oil production capacity driven by the United States. U.S. production alone is expected to add an additional 2.1 million bpd by 2030.
Total global production capacity is forecast to reach nearly 114 million bpd by 2030 outstripping demand. This increase in capacity is supported by investments from major oil-producing countries and companies.
Countries like Argentina, Brazil, Canada and Guyana are collectively expected to contribute an additional 2.7 million bpd.
The resulting surplus in production capacity is predicted to lead to levels of spare capacity not seen since the peak of the COVID-19 lockdowns.
The expected surplus in production capacity is likely to exert downward pressure on oil prices. This could undermine the efforts of OPEC+ to manage market stability and control prices.
The IEA warns that the ability of OPEC+ to manage the market may be compromised by the rising production from non-member countries. OPEC+’s market share has already dropped to 48.5%, the lowest since its formation in 2016.
With a “massive cushion” of spare capacity, the oil market could experience a period of lower prices. This scenario would have major implications for oil-producing economies and companies worldwide.
The IEA advises that oil companies need to realign their business strategies to prepare for the coming changes in the market.
One of the key drivers for the change in oil demand is the economic transition in China. The IEA projects that China’s economic growth, which has been a major driver of global oil demand will slow down significantly.
The IEA’s forecast assumes a 3% annual global economic growth for the remainder of the decade.
The rise of electric vehicles is decreasing the reliance on oil for transportation. The IEA predicts that more than one out of every five cars sold globally will soon be electric.
Conventional vehicles are becoming more fuel-efficient, further reducing oil consumption. Countries in the Middle East, which currently use huge amounts of oil for electricity generation are transitioning to renewables and natural gas.
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The report projects that global oil demand will peak and plateau before 2030, reaching about 106 million barrels per day, up from the 2023 average of just over 102 million barrels per day.
Global oil production capacity is forecast to rise by 2030, driven by the United States and other American producers.
The total capacity is expected to reach nearly 114 million barrels per day, creating a surplus of around 8 million barrels per day above projected demand.
Non-OPEC+ producers are expected to lead the increase in production capacity. The United States is poised to contribute with an anticipated addition of 2.1 million barrels per day.
Other contributors include Argentina, Brazil, Canada and Guyana, which together are expected to add 2.7 million barrels per day.
Global refining capacity is set to grow by 3.3 million barrels per day by 2030, a rate below historical trends. This expansion should be sufficient to meet the demand for refined oil products, given the concurrent increase in non-refined fuels like biofuels and natural gas liquids (NGLs).
As the surplus grows and demand for traditional refined products stabilizes or decreases, some refineries in Europe and the United States may face closure.
Oil demand in advanced economies is expected to continue its long-term decline. By 2030, demand in these regions is projected to fall to less than 43 million barrels per day, a level last seen in 1991, excluding the pandemic period.
The growing influence of non-OPEC+ producers, especially the United States may reduce the geopolitical leverage of traditional oil powers in the Middle East.
The International Energy Agency’s (IEA) latest report, Oil 2024, forecasts a shift in the oil market by the end of the decade.
Global oil demand growth is expected to slow and peak at around 106 million barrels per day (bpd) by 2030. Oil production capacity is anticipated to rise to nearly 114 million bpd by 2030, leading to a surplus of approximately 8 million bpd.
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