The International Energy Agency (IEA) is forecasting a significant surplus in the global oil market in the coming years, driven by slowing demand growth and a surge in supply.

The IEA’s recently published Oil 2024 report outlines a future where the oil sector will be comfortably supplied through 2030, though energy security will remain a crucial concern due to transformative forces within the sector.

The report points to a slowdown in global oil demand growth as the green energy transition progresses.

Despite demand from fast-growing Asian economies, the aviation and petrochemical sectors, various factors like rising electric vehicle sales, improved fuel efficiency, and reduced oil use for electricity generation are expected to offset these gains.

As a result, global oil demand is projected to plateau at around 106 million barrels per day by the end of this decade, compared to just over 102 million barrels per day in 2023.

IEA Executive Director Fatih Birol commented in a press release that global oil demand is expected to peak by 2030 due to clean energy transitions and economic shifts.

While global oil demand is forecasted to be higher in 2030, particularly in emerging Asian economies and for jet fuel and petrochemical feedstocks, demand in advanced economies is projected to decline.

Non-OPEC+ Countries to Drive Oil Supply Growth

Global oil production capacity is set to expand, primarily led by the US and other countries in the Americas.

The IEA report anticipates that non-OPEC+ countries will contribute significantly to the increased global oil production capacity by 2030. The US is expected to add 2.1 million barrels per day, with other countries like Argentina, Brazil, Canada, and Guyana adding a combined 2.7 million barrels per day.

While the growth rate may slow towards the end of the decade as existing projects conclude, there is potential for further increases with additional approved projects.

This surplus in oil supply could push spare capacity to levels unseen since the COVID-19 lockdowns in 2020.

Global refining capacity is also projected to rise, meeting the demand for refined oil products. The supply of non-refined fuels like biofuels and natural gas liquids may result in refinery closures and slower capacity growth in Asia after 2027.

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Securities Disclosure: The author has no direct investment interest in any company mentioned in this article.