IEA: "Major" Global Oil Surplus Coming This Decade

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 IEA’s recently published Oil 2024 report outlines a future where the oil sector will be comfortably supplied through 2030, although 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.

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.

“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 1 million barrels per day,” commented IEA Executive Director Fatih Birol in a Wednesday (June 13) press release.

“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.

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Securities Disclosure: I, Giann Liguid, hold no direct investment interest in any company mentioned in this article.