In its latest mid-term market report, the International Energy Agency (IEA) pointed out that the growth in oil demand is expected to slow and peak at around 106 million barrels per day by 2030.
Meanwhile, the IEA predicts that by 2030, global oil production capacity will increase to nearly 114 million barrels per day, exceeding the projected global demand by 8 million barrels per day.
The IEA warns that these changes could have "significant consequences" for the oil market.
On March 27, 2024, an oil pump jack stood near the Callon Petroleum Company in Monahans, Texas.
Texas has reached a record high in employment, with oil and gas production playing a vital role in the Permian Basin, which spans a large area of West Texas.
According to a report released earlier this month by Governor Gregg Abbott, the unemployment rates in Midland and Odessa, towns in the Permian Basin, were 2.6% and 3.5%, respectively.
The IEA stated on Wednesday that from now until the end of the century, global oil production, led by the United States, will significantly increase and is expected to surpass demand growth, resulting in unprecedented levels of idle capacity, potentially disrupting OPEC+'s market management.
This prediction prompted a stern warning from IEA Executive Director Fatih Birol to major oil companies, indicating that the world's largest energy giants might need to align their business strategies with the ongoing changes.
In its latest mid-term market report, "Oil 2024," the global energy watchdog stated that the growth in oil demand is expected to slow and eventually peak at nearly 106 million barrels per day by 2030.
Compared to 2023's daily average of 102 million barrels, this is a slight increase.
Meanwhile, the IEA forecasts that by 2030, global oil production capacity will surge to nearly 114 million barrels per day, surpassing the projected global demand by 8 million barrels per day.
The IEA states that this will lead to unprecedented levels of idle capacity—apart from the peak of the COVID-19 lockdowns in 2020.
It warns that these changes could have "major impacts" on the oil market, including the US shale oil industry and the economies of OPEC and other producing regions.
IEA's Birol stated in a press release: "With the momentum from the post-pandemic rebound fading, the push for clean energy transitions, and structural changes in China's economy, global oil demand growth is slowing and will peak by 2030."
He added, "Based on the latest data, the projections in this report indicate a significant supply surplus this decade, suggesting that oil companies may need to ensure their business strategies and plans are prepared for the changes underway."
The report is published as countries seek to move away from fossil fuels, with growing momentum for clean and energy-efficient technologies.
The burning of fossil fuels such as coal, oil, and gas is a major driver of the climate crisis.
According to the IEA, the share of fossil fuels in the global energy supply has remained around 80% for decades, although it is expected to fall to around 73% by 2030.
Oil demand in developed economies will further decline.
Although oil demand growth is expected to slow, the IEA points out that in the absence of stronger policy measures or behavioral changes, crude oil demand will still be about 3.2 million barrels per day higher in 2030 than in 2023.
The agency states that this growth is primarily driven by rapidly growing Asian economies and strong demand from the aviation and petrochemical industries.
However, the IEA states that by 2030, oil demand in developed economies will fall from nearly 46 million barrels per day last year to below 43 million barrels per day.
Apart from the decline during the COVID-19 pandemic, the last time oil demand in developed economies was this low was in 1991.
In a landmark report in 2021, the IEA urged the world to refrain from developing new oil, gas, or coal if it is to achieve net-zero emissions by 2050.
The findings of that report were widely criticized by several OPEC+ producing countries, which advocate for dual investments in hydrocarbons and renewable energy during the transition until green energy can meet global consumption demands on its own.
Led by Saudi Arabia, OPEC+ is an influential energy alliance composed of OPEC members and some non-OPEC partners.
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