Agency predicts a sharp slowdown in global oil demand growth next year for an increase of just one million barrels per day
Global oil demand increased by two million barrels per day (mb/d) in 2023 to 99 mb/d, but the IEA predicts a sharp slowdown in demand growth next year for an increase of just one mb/d.
“The rise of electric mobility, led by China, is wrong-footing oil producers,” the report said. “The slowdown in oil demand growth … puts major resource owners in a bind as they face a significant overhang of supply.”
The rise of electric mobility, led by China, is wrong-footing oil producers
International Energy Agency report
Crude production from OPEC and Russia hit a peak of around 47 mb/d in 2018, but has been falling as output from other countries, including Canada, has risen, thereby putting pressure on prices since output has sometimes outstripped demand.
Led by Saudi Arabia, OPEC+ is already holding back a record spare capacity of around six million barrels a day following a series of production cutbacks, a level that the IEA expects will reach eight million barrels by 2030.
“The world is set to enter a new energy market context in the second half of this decade because underlying market balances for oil and gas are easing,” IEA executive director Fatih Birol told Bloomberg. “Bar major geopolitical conflicts, we will be entering a period where prices will see significant downward pressures.”
We’ve witnessed the Age of Coal and the Age of Oil, and we’re now moving at speed into the Age of Electricity
Fatih Birol
Electricity use has grown at twice the pace of total energy demand over the past decade, and, driven by China, it will increase six times as fast during the coming 10 years, according to the IEA. Electric vehicles will account for 50 per cent of new car sales worldwide by 2030, up from 20 per cent currently, it predicted.
“In energy history, we’ve witnessed the Age of Coal and the Age of Oil, and we’re now moving at speed into the Age of Electricity,” Birol said.
A potential 50 per cent increase in global LNG export capacity could contribute to a glut that would put downward pressure on prices, the IEA said.
A softening in prices would be a departure from the first part of the decade, when rocketing energy costs following Russia’s invasion of Ukraine in 2022 helped fuel inflation. Prices have since cooled somewhat, with crude futures down 20 per cent from this year’s highs to less than US$75 a barrel despite rising tensions in the Middle East.
Notably, the IEA slightly hiked its projections for the share of fossil fuels that will make up the global energy supply by 2030 to 75 per cent, from the 73 per cent projected in last year’s report. The agency continues to project that fossil fuels will make up less than 60 per cent of the global energy supply by 2050.
The IEA’s report has attracted its share of criticism for its timelines projecting the transition away from fossil fuels.
Oil production forecasts put out by OPEC and the U.S. Energy Information Administration (EIA) have typically been less sanguine about the displacement of oil by renewables over the remainder of the decade.
Forecasted Canadian oil supply growth published by the EIA is approximately two times to three times the amounts projected by the IEA in 2024 and 2025.
Although the IEA’s projections for subdued oil demand this year look increasingly vindicated, some of its past predictions have missed the mark, such as its expectation of a supply crunch a decade ago and forecasts that Russian output would plunge after the invasion of Ukraine.
— With files from Bloomberg