The International Energy Agency recently released a report indicating that the surge in global oil production, led by the United States, is expected to surpass demand growth between now and the end of the decade. This forecast paints a picture of unprecedented levels of spare capacity in the oil market, which could potentially disrupt the management strategies of OPEC+.
IEA Executive Director Fatih Birol issued a stern warning to Big Oil, suggesting that the world’s largest energy majors may need to realign their business strategies to adapt to the changing landscape of the oil market. The report titled Oil 2024 projects a slowdown in oil demand growth, ultimately reaching a peak of nearly 106 million barrels per day by 2030, up from just over 102 million barrels per day in 2023.
The IEA anticipates total oil production capacity to surge to nearly 114 million barrels per day by 2030, exceeding the projected global demand by a significant margin of 8 million barrels per day. This surplus in capacity would create unprecedented levels of spare capacity in the market, reminiscent of the levels observed during the height of the Covid-19 lockdowns in 2020.
According to the IEA, these dynamics could have significant consequences for oil markets, affecting players such as the U.S. shale industry and producer economies in OPEC and beyond. As global oil demand growth slows down and approaches its peak by 2030, the structure of the market is poised for a major shift, prompting oil companies to reassess their business strategies and plans.
The report comes at a time when countries are actively transitioning away from fossil fuels towards cleaner and energy-saving technologies. The reliance on fossil fuels, including coal, oil, and gas, has been identified as a key driver of the climate crisis. While the share of fossil fuels in the global energy supply has remained around 80% for decades, the IEA expects this figure to decrease to approximately 73% by 2030.
Despite the anticipated slowdown in oil demand growth, the IEA projects that without stronger policy measures or behavioral changes, crude demand is projected to increase by approximately 3.2 million barrels per day by 2030 compared to 2023. This growth is primarily driven by robust demand from rapidly growing economies in Asia, as well as the aviation and petrochemical sectors.
In advanced economies, however, the IEA predicts a decline in oil demand to below 43 million barrels per day by 2030, down from nearly 46 million barrels per day in the previous year. This decline reflects a shift in consumption patterns, with advanced economies reducing their reliance on oil for energy needs.
The IEA’s landmark 2021 report emphasized the need to refrain from new developments in oil, gas, or coal if the world is to achieve net zero emissions by 2050. This call to action is crucial in combating climate change and transitioning towards a more sustainable energy future.
Led by Saudi Arabia, OPEC+ represents a significant energy alliance comprising both OPEC and non-OPEC partners. As the oil market undergoes transformative changes, the role of such alliances in shaping energy policies and market dynamics will become increasingly vital in the years to come.