The International Energy Agency (IEA) is forecasting a significant surplus in the global oil market in the coming years, saying the imbalance will be driven by slowing demand growth and a surge in supply.
The report points to a slowdown in global oil demand growth as the green energy transition progresses.
Even with robust demand from fast-growing Asian economies and the aviation and petrochemical sectors, factors such as rising electric vehicle sales, improved fuel efficiency in conventional vehicles, reduced oil use for electricity generation in the Middle East and structural economic shifts are expected to offset these gains.
Consequently, global oil demand, which averaged just over 102 million barrels per day in 2023, is forecast to plateau at around 106 million barrels per day by the end of this decade.
“This report’s projections, based on the latest data, show a major supply surplus emerging this decade, suggesting that oil companies may want to make sure their business strategies and plans are prepared for the changes taking place.”
Despite the anticipated slowdown, global oil demand is expected to be 3.2 million barrels per day higher in 2030 versus 2023, barring stronger policy interventions or big behavioral changes. This increase will be driven by emerging Asian economies, particularly India, and by the growing use of jet fuel and petrochemical feedstocks, especially in China.
Oil demand in advanced economies is projected to decline from nearly 46 million barrels per day in 2023 to less than 43 million barrels per day by 2030, a level last seen in 1991, excluding the pandemic period.
Meanwhile, global oil production capacity is set to expand, led primarily by the US and others in the Americas.
The IEA report forecasts that non-OPEC+ countries will lead the growth in global oil production, contributing significantly to the anticipated increase in capacity by 2030. The US is expected to add 2.1 million barrels per day, with Argentina, Brazil, Canada and Guyana together adding another 2.7 million barrels per day.
While the growth rate among these leading non-OPEC+ producers is likely to slow toward the decade’s end as existing projects conclude, potential remains for further increases if additional projects are approved — in this case, another 1.3 million barrels per day could potentially be added by 2030.
Such a surplus would push spare capacity to levels unseen since the COVID-19 lockdowns in 2020.
Global refining capacity is projected to rise by 3.3 million barrels per day between 2023 and 2030. Although this rate is below historical trends, it is deemed sufficient to meet the demand for refined oil products.
This expectation is partly due to an increase in the supply of non-refined fuels like biofuels and natural gas liquids, which may result in refinery closures and slower capacity growth in Asia after 2027.
Securities Disclosure: I, Giann Liguid, hold no direct investment interest in any company mentioned in this article.
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