Commodities

Oil Demand to Peak by 2029 as Major Supply Glut Looms, IEA Reports

By Noah Browning

LONDON – The International Energy Agency (IEA) announced that global oil demand is expected to peak by 2029 and will start to decline the following year, largely due to increased supply from the U.S. and other non-OPEC countries. This shift is anticipated to lead to a significant surplus in oil supply during the upcoming decade.

The IEA updated its forecast for peak oil demand, moving it forward from an earlier prediction of 2030. This outlook contrasts with that of the Organization of the Petroleum Exporting Countries (OPEC), which anticipates continued demand growth beyond 2029, partly due to a prolonged transition to cleaner energy sources and has yet to predict a peak in demand.

According to the IEA’s annual report, oil demand will stabilize at about 105.6 million barrels per day (bpd) by 2029, followed by a slight decrease in 2030 as the adoption of electric vehicles increases, energy efficiency improves, and the energy sector shifts away from oil.

The IEA projects that supply capacity will reach nearly 114 million bpd by 2030, exceeding projected demand by 8 million bpd. This increase will primarily be driven by non-OPEC+ producers, with the U.S. accounting for three-quarters of the growth.

IEA Executive Director Fatih Birol stated, "The report’s projections indicate a substantial supply surplus emerging this decade, signaling that oil companies should adjust their business strategies to adapt to these evolving circumstances."

Demand growth is expected to be primarily fueled by emerging economies in Asia, particularly India, where road transportation will play a significant role, alongside increases in jet fuel and petrochemicals in China.

This anticipated supply surplus could have far-reaching impacts, especially for OPEC nations that heavily rely on oil production for government revenue. The IEA noted, "High spare capacity levels could significantly affect oil markets, influencing producer economies within and outside OPEC and impacting the U.S. shale industry."

In a separate report, the IEA reduced its oil demand growth forecast for 2024 to 960,000 bpd, a decrease of 100,000 bpd, attributing this adjustment to weak consumption in developed nations. They expect demand growth to rise to 1 million bpd in the following year due to a lackluster economy and the shift towards renewable energy.

These figures are significantly lower than those projected by OPEC, which maintained its 2024 demand growth forecast at 2.25 million bpd and 1.85 million bpd for 2025. The growing disparity between the IEA and OPEC’s projections for 2024 demand growth represents the largest difference seen since at least 2008.

Birol highlighted the notable divergence in projections, stating, "We will evaluate the data continually to provide the best information for decision makers and the public."

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