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RIYADH: Growth in global oil demand is expected to slow in the coming years as the world continues its energy transition, according to a new analysis.

In its latest report, the International Energy Agency (IEA) indicates that global oil demand will increase by 1 million barrels per day (bpd) in 2024. This projection contradicts forecasts by the Organization of Exporting Countries oil (OPEC).

On June 11, the latter said that global oil demand would increase by 2.25 million bpd in 2024 due to growth in markets such as China, India, the Middle East and Latin America.

In its analysis, the IEA notes that falling oil demand in the coming years will ease market tensions and says it will bring excess production capacity to levels not seen since the Covid crisis. 19.

“As the post-pandemic recovery loses momentum, the clean energy transition advances, and the structure of China’s economy transforms, global oil demand growth is slowing; it is expected to reach its maximum level by 2030. This year, we expect demand to increase by around 1 million bpd,” says Fatih Birol, executive director of the IEA.

Mr. Birol emphasizes that oil companies must prepare to face the changes currently occurring in the energy sector.

“Projections in this report, based on the most recent data, show that this decade will be marked by major oversupply, suggesting that oil companies should ensure that their strategies and operational plans are adapted to the changes in course,” addsMr. Birol.

The report also predicts that growing sales of electric vehicles and the replacement of oil with renewable energy or gas in the electricity sector will significantly reduce the use of oil in road transport and in electricity generation.

Consumption of liquefied petroleum gas is expected to grow, according to the IEA. (Shutterstock)

Emerging Economies Will Drive Oil Demand in Coming Years

According to the report, global oil demand, which includes biofuels, averaged just over 102 million bpd in 2023. It will stabilize at nearly 106 million bpd toward the end of the decade.

“Despite slowing growth, global oil demand in 2030 is expected to be 3.2 million bpd higher than in 2023, unless stricter policy measures are implemented or changes in behavior take place,” estimates the energy think tank.

The IEA explains that this increase is expected to be driven by emerging Asian economies such as India, whose oil consumption for transport is increasing, and by increased use of kerosene and raw materials by industry. booming petrochemical sector, particularly in China.

Additionally, consumption of naphtha, liquefied petroleum gas (LPG) and ethane will jump by 3.7 million bpd between 2023 and 2030, driven by increased use of LPG for clean cooking.

However, oil demand in developed countries is expected to continue its decades-long decline, falling from almost 46 million bpd in 2023 to less than 43 million in 2030.

“Apart from during the pandemic, the last time that oil demand in developed countries was this low was in 1991,” reports the IEA.

According to the report, producers outside the Organization of the Petroleum Exporting Countries and its allies (OPEC+) will lead the expansion of global production capacity needed to meet this anticipated demand, primarily in economies emerging countries, which will represent three-quarters of the increase expected by 2030.

“The United States alone is expected to contribute 2.1 million bpd to non-OPEC+ countries’ gains, while Argentina, Brazil, Canada and Guyana will make an additional contribution of 2.7 million bpd.” The report predicts that as the flow of approved projects dries up, towards the end of the decade, capacity growth of major non-OPEC+ producers will slow and then stop,” the report said.

“However, if companies continue to approve additional projects already planned, non-OPEC+ capacity could increase by 1.3 million bpd by 2030.”

OPEC is more optimistic about growth in oil demand. (Shutterstock)

Refining capacity

The report highlights that global refining capacity is expected to grow by 3.3 million bpd between 2023 and 2030, which is well below historical trends.

The IEA estimates that this growth should be sufficient to meet demand for refined petroleum products during this period given the simultaneous increase in the supply of unrefined fuels such as biofuels and natural gas liquids.

The agency further states that refiners will need to gradually modify their products to respond to divergent trends in the distillate market. Indeed, the demand for gasoline is decreasing due to the increasing market share of electric vehicles, while the consumption of kerosene is increasing.

According to the IEA, unrefined fuel products are expected to contribute more than 75% of projected demand growth over the period 2023-2030.

“This surge in unrefined product supply will place additional pressure on refinery operating rates and profitability, particularly in mature demand centers. This suggests further capacity closures by the end of the decade,” the report underlines.

“Capacity growth will remain concentrated in Asia, particularly China and India, but after 2027 there are signs of slowing expansion.”

OPEC optimistic

While the IEA forecasts a slowdown in oil demand growth, OPEC is optimistic about the future, and the producers’ alliance believes its forecasts are more accurate.

At the International Economic Forum in St. Petersburg on June 6, Haitham al-Ghais, secretary general of OPEC, said the world would see continued growth in oil demand in the coming years.

“Last year, OPEC’s forecast for oil demand was the best. All those who criticized OPEC’s forecasts continued to adjust their figures throughout the year,” underlined Mr. Al-Ghais.

Furthermore, the latter made it clear that all energy sources were necessary for the future and that efforts must be made to reduce emissions.

“According to our statistical projections, 600 million people will move to new cities by 2030 as part of urbanization. This puts things in context. We need all sources of energy. We should not discriminate against any energy source. The focus must be on reducing emissions,” concluded Mr. Al-Ghais.

This text is the translation of an article published on Arabnews.com

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