The International Energy Agency (IEA) issued a forecast on Wednesday indicating that a rise in oil production led by the United States is expected to exceed the growth in demand globally from now until the end of the decade.
This imbalance is projected to result in unprecedented levels of spare capacity and could potentially disrupt the market management efforts of OPEC+.
IEA Executive Director Fatih Birol cautioned major oil companies to realign their business strategies in response to these anticipated changes. The IEA’s latest report, Oil 2024, predicts a deceleration in oil demand growth leading up to a peak of nearly 106 million barrels per day by 2030, compared to just over 102 million barrels per day in 2023.
Concurrently, the IEA foresees a surge in total oil production capacity to almost 114 million barrels per day by 2030, surpassing the projected global demand by 8 million barrels per day. This would result in an unprecedented level of spare capacity, akin to levels observed during the peak of the Covid-19 lockdowns in 2020.
The agency raised concerns about the potential implications of these dynamics on the oil markets, particularly for the U.S. shale industry and producer economies within OPEC and other regions. This forecast coincides with global efforts to transition away from fossil fuels towards cleaner and energy-efficient technologies, driven by concerns over climate change.
While fossil fuels have historically comprised approximately 80% of the global energy supply, the IEA anticipates this percentage to decline to around 73% by 2030. Despite the anticipated slowdown in oil demand growth, the IEA projects an increase of approximately 3.2 million barrels per day in demand by 2030 compared to 2023, driven by fast-growing economies in Asia, as well as the aviation and petrochemical sectors.
In advanced economies, the IEA expects oil demand to fall below 43 million barrels per day by 2030, a decrease from almost 46 million barrels per day in the previous year. Notably, apart from the impacts of the Covid-19 pandemic, oil demand in advanced economies has not been that low since 1991.
In a significant report released in 2021, the IEA emphasized the necessity of avoiding new oil, gas, or coal projects to achieve a net-zero emissions target by 2050. This stance was met with criticism from some OPEC+ members, who advocate for simultaneous investments in both hydrocarbons and renewables until renewable energy can independently meet global consumption demands.
