On June 12, the International Energy Agency (IEA) released a report predicting a severe surplus in the global oil market by the end of this decade, driven by slowing demand growth and a surge in supply.
The IEA's mid-term annual oil market report highlights that, based on current policies and market trends, strong demand from Asia's rapidly growing economies and the aviation and petrochemical sectors will fuel oil consumption in the coming years.
However, factors such as the increasing adoption of electric vehicles, improved fuel efficiency in traditional vehicles, reduced oil use for power generation in the Middle East, and structural economic changes will gradually offset this growth. Global oil demand, including biofuels, was approximately 102 million barrels per day (bpd) in 2023 and is projected to stabilize at around 106 million bpd by the end of the decade.
Simultaneously, a sharp increase in global oil production, led by the US and other American oil producers, is expected to result in a significant surplus. By 2030, global oil production capacity is predicted to reach nearly 114 million bpd, exceeding projected demand by 8 million bpd. This imbalance could have significant implications for the oil market, affecting the Organization of the Petroleum Exporting Countries (OPEC), other oil-producing nations, and the US shale oil industry.
IEA Executive Director Fatih Birol stated that factors such as the waning impact of the pandemic, the advancement of the clean energy transition, and structural changes in China's economy are slowing global oil demand growth, which is expected to peak by 2030. Recent data supports the forecast of a severe oversupply in the global oil market during this decade.
The report recommends that major oil companies adjust their strategies in response to slowing demand growth and the growing emphasis on the clean energy transition. With robust policy measures and technological advancements, fossil fuels' share in the global energy mix is projected to decline from 80% to 73% by 2030. Companies like BP and Shell have already shifted towards diversified renewable energy portfolios, while others, such as ExxonMobil, remain focused on oil and natural gas.
Meanwhile, OPEC announced that eight OPEC and non-OPEC oil-producing countries would maintain voluntary production cuts totaling 3.85 million bpd in the third quarter of this year to stabilize the international oil market. According to the statement, the countries will extend the voluntary production cut of 2.2 million bpd announced in November 2023 through September 2023, with a gradual rollback depending on market conditions. Additionally, the voluntary production cut of 1.65 million bpd announced in April 2022 will remain in effect until the end of 2025.
OPEC's monthly oil market report retained its April forecast for global oil demand in 2024 and 2025, predicting that global daily oil demand in 2024 will rise by 2.2 million bpd compared to 2023, reaching 104 million bpd. By 2025, global daily oil demand is expected to increase by 1.8 million bpd compared to 2024, reaching 106 million bpd.
