Putin admits deficiencies while Ukraine counterattacks. According to the International Energy Agency, global oil demand growth will slow to a trickle in the next few years and peak this decade, with Chinese consumption slowing down after an initial pent-up resurgence.
According to IEA Director Fatih Birol, “the shift to a clean energy economy is picking up pace,” and “a peak in global oil demand is in sight before the end of this decade” due to the development of electric vehicles, energy efficiency, and other technologies.
According to the agency’s most recent medium-term market study, released on Wednesday, global oil demand is expected to increase by 6% from 2022 to 2028, driven by the petrochemical and aviation sectors.
There will be a slowing in annual demand growth from the current 2.4 million barrels per day to a mere 400,000 barrels per day by 2028.
“The downturn in advanced economies renders the global outlook even more dependent on China’s post-Covid pandemic reopening being able to maintain its early momentum, which should eventually lift global trade and manufacturing,” the agency said, noting that Beijing’s “pent-up” consumption will peak in the middle of 2023 after a 1.5 million barrels per day rebound but then slow to an average of 290,000 barrels per day year-on-year from 2024 to 2028.
The World Energy Agency (IEA claimed that last year’s “unprecedented reshuffling of global trade flows” and emergency releases from members’ strategic petroleum reserves “allowed industry inventories to rebuild, easing market tensions” as demand picked up.
In terms of supply, the IEA anticipates that countries like the United States and other American producers will “dominate medium-term capacity expansion plans,” as opposed to OPEC+ members like Saudi Arabia and other Gulf states. Despite a downturn in the United States, the International Energy Agency predicts that global supply capacity will increase by 5.9 million barrels per day to 111 million barrels per day by 2028. As a result, OPEC powerhouses Saudi Arabia and the United Arab Emirates will have a combined 4.1 million barrels of daily spare capacity.
Since the end of last year, restrictions have been imposed on Moscow’s seaborne crude and oil product exports, and Western corporations that assisted production have left, leaving Russian output “clouded,” according to the IEA. For the six-year forecast period ending in 2028, the IEA now expects Russian supply to decline by a net 710,000 barrels per day.
It is possible that Moscow will be able to avoid a far steeper fall if it is able to self-finance its oil industry operations and if it has access to Chinese equipment and services. The agency also noted that a further tightening of western banking sanctions against Russia could exacerbate the downward trend. It predicts that 2.5 million barrels per day of Russian petroleum have been redirected from the West to the East, resulting in a “two-tier market.”
A radical shift is on the horizon.
The IEA has been sounding the alarm over rising upstream oil and gas investment, which is expected to reach $528 billion in 2023, a record high since 2015, and which will both meet demand and exceed “the amount that would be needed in a world that gets on track for net zero emissions.”
“Oil producers need to pay careful attention to the gathering pace of change and calibrate their investment decisions to ensure an orderly transition,” Birol added.
In an interview with CNBC’s “Street Signs Europe” on Wednesday, Toril Bosoni, head of the IEA’s oil industry and markets section, said that the global energy crisis that accompanied the start of the COVID-19 epidemic and Russia’s invasion of Ukraine had “really accelerated” the move away from fossil fuels.
Although growth and demand for oil remain robust in 2018 due to the continuation of the COVID recovery, “over the medium term, we are really seeing that all these policy measures that governments have put in place [and] the changes that consumers are making for pricing and other reasons are having an impact.”
If the world is to achieve net zero by 2050, the International Energy Agency (IEA) has urged no new oil, gas, or coal development, a move widely criticized by several OPEC+ producers who advocate for dual investment in hydrocarbons and renewables.
Bosoni remarked on Wednesday, “There’s a real transformation coming,” citing the widespread adoption of electric vehicles and energy-saving initiatives.
The International Energy Agency (IEA) points out in its Oil 2023 report that meeting the worldwide net-zero emissions objective will require both legislative and behavioral changes, as well as keeping an eye on the effect electric vehicles will have on oil demand.
It is predicted that “annual growth in oil demand will be powerfully moderated” during the prediction due to “the adoption of tighter efficiency standards by regulators, structural changes to the economy, and the ever-accelerating penetration of EVs.” According to IEA projections for 2028, nearly 26 million EVs will be sold globally.