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International Energy Agency (IEA) has sounded alarm about a substantial surplus in global oil supply, forecasting an excess of millions of barrels per day by the end of this decade.

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The IEA’s latest medium-term oil market outlook underscored a dramatic shift as energy transitions gain momentum and global oil production capacity surges.

The report, Oil 2024, revealed that while the world’s demand for oil is set to slow down in the coming years, production is expected to rise. This trend is likely to alleviate market pressures and elevate spare capacity to levels unprecedented outside of the Covid-19 pandemic, as per the report.

"As the pandemic rebound loses steam, clean energy transitions advance, and the structure of China’s economy shifts, growth in global oil demand is slowing down and set to reach its peak by 2030," stated IEA Executive Director Fatih Birol.

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"This year, we expect demand to rise by around 1 million barrels per day."

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Global oil demand is projected to increase by 3.2 million barrels per day from 2023 to 2030 unless more robust policies or behavioural changes are adopted.

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Emerging economies in Asia, particularly India’s transportation sector and China’s booming petrochemicals industry, are expected to drive this demand.

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Conversely, advanced economies are likely to see a decline in oil consumption, falling from nearly 46 million barrels per day in 2023 to under 43 million barrels per day by 2030 - a level last seen in 1991 outside of the pandemic period.

Global oil production capacity

In tandem with these demand trends, global oil production capacity is forecast to rise to nearly 114 million barrels per day by 2030, an astonishing 8 million barrels per day above the projected global demand.

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This would create a level of spare capacity not seen since the peak of the Covid-19 lockdowns in 2020.

Such a surplus could have major repercussions for oil markets and may impact producer economies in OPEC and others. 

To meet the demand, the expansion of production capacity is being led predominantly by producers outside of OPEC+, with the United States poised to contribute an additional 2.1 million barrels per day.

Other contributions are expected from Argentina, Brazil, Canada, and Guyana, collectively adding 2.7 million barrels per day.

(With inputs from agencies)