SUMMARY
- The International Energy Agency predicts a significant slowdown in global oil demand, reaching its peak within this decade.
- Clean energy transition, energy efficiency, and electric vehicles are major contributing factors to this slowdown.
- Chinese oil consumption recovery, OPEC+ decisions, and dips in Russian output are other key elements shaping the future of global oil demand.
The future of global oil demand is predicted to significantly slow down and reach its peak within the decade, as per the International Energy Agency (IEA). This slowdown is attributed to an anticipated decrease in Chinese consumption following its initial recovery surge.
The accelerating shift towards clean energy and advancements in technologies such as electric vehicles and energy efficiency are major contributing factors. This is according to IEA Executive Director Fatih Birol, who envisions a peak in global oil demand by the end of this decade under current market conditions and policies.
The latest medium-term market report by the agency predicts a 6% increase in global oil demand from 2022, reaching 105.7 million barrels per day by 2028. However, this growth will not be linear, with an expected annual increase of 2.4 million barrels per day this year, which will taper down to 400,000 barrels per day by 2028.
The agency’s report underlines that future global outlook is heavily dependent on the recovery speed of China post-Covid, which, if maintained, will significantly impact global trade and manufacturing. However, the IEA predicts China's consumption surge to peak by mid-2023 and gradually slow down from 2024 to 2028.
In terms of supply, the IEA anticipates oil producers outside OPEC+ - the influential coalition of the Organization of the Petroleum Exporting Countries and its allies - to dictate the medium-term capacity expansion plans. This includes the U.S. and other American producers. A dip in Russian output, however, is expected due to various factors, including sanctions and the withdrawal of Western companies facilitating production.
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