Fatih Birol, executive director of the IEA. Credit: Dominic Dudley via Shutterstock.

The IEA stated on Wednesday that global oil demand is expected to reach its highest point by 2030 and start to decrease the following year. Additionally, the IEA projects that oil supply capacity will significantly exceed demand by the end of this decade.

The IEA’s June 2024 Oil Market Report published on 12 June forecasts that global oil demand, which includes biofuels, averaged just over 102 million barrels per day (mbbl/d) in 2023 and will level off near 106mbbl/d towards the end of this decade.

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Global oil production capacity is expected to increase in the coming years, with the US leading the surge. This increase is anticipated to surpass the growth in demand until 2030. The report predicts that by 2030, total supply capacity will reach nearly 114mbbl/d, or 8mbbl/d more than the projected global demand.

“As the pandemic rebound loses steam, clean energy transitions advance and the structure of China’s economy shifts, growth in global oil demand is slowing down and set to reach its peak by 2030. This year, we expect demand to rise by around one mbpd [million barrels per day],” said IEA executive director Fatih Birol. 

“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,” he added.

The IEA states that non-OPEC+ producers are leading the increase in global production capacity to satisfy this projected demand, representing 75% of the anticipated growth by 2030. The US is expected to contribute 2.1mbbl/d to the non-OPEC+ production increase, and Argentina, Brazil, Canada and Guyana are expected to add another 2.7mbbl/d.

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OPEC+ plans to gradually reduce additional voluntary supply cuts of up to 2.2mbbl/d from the fourth quarter of 2022 (Q4 2022) through Q3 2024. The bloc has assured that the increase in production can be halted or reversed based on market conditions. The IEA will update its OPEC+ supply figures once this decision is confirmed.

Global supply is forecast to rise by 1.8mbbl/d in 2025 as non-OPEC+ output increases by 1.5mbbl/d.

The report states that between 2023 and 2030, global refining capacity is projected to increase by 3.3mbbl/d, which is considerably lower than historical growth rates. 

Nevertheless, this growth is expected to meet the demand for refined oil products during this period due to a simultaneous increase in the supply of non-refined fuels like biofuels and natural gas liquids. The IEA said this could lead to the closure of refineries towards the end of the outlook period and a deceleration in capacity expansion in Asia after 2027.