Only the IEA Still Insists on Peak Oil Demand Before 2030

Peak Oil Demand Before 2030
Published on: Apr 18, 2024

Recently, the momentum of rising oil prices has been lacking, with May WTI and June Brent futures falling by over 5% since last Friday. This decline is attributed to the significant increase in crude oil inventory data released by the U.S. Energy Information Administration (EIA), alongside the agency revising down the global crude oil demand growth rate.

Specifically, in the week ending April 5, U.S. crude oil inventories unexpectedly rose by 5.84 million barrels, and oil product inventories increased by 6.57 million barrels. Commercial inventories of 16.47 million barrels and Cushing crude inventories are both below the 5-year average. Additionally, the EIA estimates that U.S. crude oil production remained steady at 13.1 mb/d for the fifth consecutive week, with a year-on-year increase of 0.8 mb/d.

In the short term, the outlook for oil prices is uncertain, yet oil institutions generally remain optimistic about the long-term prospects of the oil market.

Last week, the International Energy Agency (IEA) released its latest Monthly Oil Market Report (OMR), indicating that global oil demand in 2025 is forecasted to increase by 1.147 mb/d compared to 2024, higher than the 1.0 mb/d predicted in June 2023. Compared to the IEA, other institutions have higher forecasted numbers, with the EIA predicting a 1.351 mb/d growth in oil demand by 2025, Standard Chartered forecasting a growth of 1.444 mb/d, and the OPEC Secretariat predicting 1.847 mb/d.

It is noteworthy that in the medium to long term, only the IEA currently predicts that global oil demand will peak before 2030, and this is considered the most optimistic forecast. However, the IEA also states that reaching peak oil demand does not necessarily mean an immediate sharp decline in fossil fuel consumption but rather the potential for a sustained plateau phase lasting for many years.

Regarding long-term oil demand, the EIA is the most optimistic, forecasting the demand peak to occur in 2050, which is 5 years later than the OPEC Secretariat’s prediction. Meanwhile, Standard Chartered forecasts that global oil demand will reach 110.2 mb/d by 2030 and further increase to 113.5 mb/d by 2035, without providing a peak demand forecast. According to Standard Chartered, there is a high likelihood of a structural long-term peak in oil demand within the next decade, with probable periodic declines during that period.

In other words, energy institutions unanimously agree that the peak oil demand is unlikely to occur in the short term.

The energy sector has risen by 15.8% year to date, ranking second among the 11 sectors in the U.S. stock market. However, this sector experienced a nearly 5% decline in the past week. Last week, the energy sector fund, Energy Select Sector SPDR Fund (XLE), saw a net inflow of 756 million, second only to Invesco S&P 500 Equal Weight ETF’s 2.8 billion influx.

Funds Futures Oil & Gas