The IEA’s new medium-term outlook sees comfortably-supplied oil markets until 2030, although an unwavering focus on energy security will remain essential as powerful forces transform the sector
Global oil demand growth is expected to slow in the coming years as energy transitions advance. At the same time, according to the IEA’s new oil market outlook, global oil production is expected to accelerate, easing market tensions and pushing spare capacity to levels not seen outside of the Covid crisis.
Oil 2024, the latest edition of the IEA’s annual medium-term market report, explores the far-reaching implications of these dynamics for oil supply security, refining, trade and investment. Based on today’s policies and market trends, strong demand from fast-growing economies in Asia, as well as the aerospace and petrochemical sectors, is expected to boost oil consumption in the coming years, the report said. However, these gains will be increasingly offset by factors such as increasing sales of electric vehicles, improvements in fuel efficiency for conventional vehicles, declining oil consumption for electricity generation in the Middle East and structural economic changes. As a result, the report predicts that global oil demand, which averaged just over 102 million bpd including biofuels in 2023, will stabilize at nearly 106 million bpd by the end of the decade.
At the same time, the increase in global oil production capacity, led by the United States and other producers in the Americas, is expected to outpace demand growth by 2030. Total supply capacity is forecast to increase to nearly 114 million barrels per day by 2030. – a staggering 8 million barrels per day above projected global demand, the report said. This would lead to levels of spare capacity never seen before until the height of the Covid-19 lockdown in 2020. Spare capacity at this level could have significant implications for oil markets – including OPEC and non-OPEC producing economies, as well as for the US shale industry.
“As the pandemic rebound wears off, clean energy transitions advance and the structure of China’s economy shifts, global oil demand growth is slowing and set to peak by 2030. We expect demand to increase by around 1 million barrels this year per day,” he said IEA Executive Director Fatih Birol. “This report’s projections, based on the latest data, show a large oversupply emerging this decade, suggesting that oil companies may want to ensure their business strategies and plans are prepared for the changes that are occurring.”
Despite the slowdown in growth, global oil demand is still projected to be 3.2 million barrels per day higher in 2030 than in 2023 unless stronger policy measures or behavioral changes are enforced. This increase is likely to be driven by emerging economies in Asia – notably higher consumption of transportation oil in India – and greater use of jet fuel and raw materials from a booming petrochemical industry, particularly in China. Conversely, oil demand in advanced economies is expected to continue its decade-long decline, from nearly 46 million barrels per day in 2023 to less than 43 million barrels per day by 2030. Apart from the pandemic period, oil last Demand from advanced economies was in 1991 so low.
Non-OPEC+ producers are leading the expansion of global production capacity to meet this expected demand, accounting for three-quarters of the expected increase through 2030. The United States alone is poised to gain 2.1 million barrels per day from non-OPEC+ gains, while Argentina, Brazil , Canada and Guyana contribute an additional 2.7 million barrels per day.
The report’s forecast finds that as the flow of approved projects dies out towards the end of this decade, capacity growth will slow and then stall among leading non-OPEC+ producers. However, if companies continue to approve other projects already on the drawing board, an additional 1.3 million bpd of non-OPEC+ capacity could be brought online by 2030.
According to the report, global refining capacity is on track to expand by 3.3 million barrels per day between 2023 and 2030, well below historical trends. However, this should be enough to cover the demand for refined petroleum products during this period, given the current increase in supplies of unrefined fuels such as biofuels and natural gas liquids (NGLs). This raises the prospect of refinery shutdowns toward the end of the forecast period, as well as a slowdown in capacity growth in Asia beyond 2027.