Adds IEA Birol quotes throughout
The IEA said today that it expects global liquids production capacity to exceed demand by more than 8mn b/d by the end of this decade, which it said could "usher in a lower oil price environment, posing tough challenges for producers in the US shale patch and the Opec+ bloc".
The Paris-based consumer watchdog, in its medium term Oil 2024 report, said it anticipates liquids supply capacity of 113.8mn b/d by 2030, when it projects demand at 105.4mn b/d. In terms of supply to market, the IEA said this too will exceed demand by the end of this decade, albeit by the smaller margin of 1mn b/d.
"It is important for all producers to see these developments — demand and supply — to see whether or not their business strategies are in line with these new realities," said IEA director general Fatih Birol.
The IEA bases its forecasts on "current, existing" public policies, Birol said, and they are subject to changes in geopolitics and global economics. Among these policies is the Opec+ group's output agreement that runs into 2025. Opec+ "could pause, or could reverse" its trajectory, Saudi oil minister Prince Abdulaziz bin Salman said recently.
The IEA said 2030 will be the first year beyond peak demand, which it puts in 2029 at 105.6mn b/d. After 2030, the IEA expects consumption to plateau.
"We see a gradual [demand] decline from the 2030s, not a big, steep decline," Birol said.
It projects demand growing by 960,000 b/d this year and by around 1mn b/d in 2025, but by just 3.2mn b/d in the 2023-30 period. It said this is driven by a combination of shifting transport dynamics, including increased take-up of electric vehicles (EVs) and greater fuel efficiencies in internal combustion engines, displacement of oil used in power generation, particularly in the Middle East, and slowing growth in China.
The gap between 2024 demand growth forecasts from the IEA and Opec is now almost 1.3mn b/d. Birol noted this "big gap" but was diplomatic when pressed for reasons.
"We respect all institutions' forecasts," he said. "We will see at the end of the year what the numbers will be."
Much of this decade's demand increase will be for petrochemical feedstocks like naphtha, LPG and ethane, the IEA said, projecting gains of 2.8mn b/d or around 75pc of the overall rise in consumption. Road fuel demand has already plateaued, it said.
The increase in supply capacity will reflect this shift, the IEA said, with 45pc of the increase by 2030 — or 2.7mn b/d — to be NGLs and condensate. The build out of capacity will be concentrated among non-Opec+ countries, it said, notably the US, Brazil and Guyana. But the increase will be front-loaded, and "the sanctioned project queue fizzles out" towards the end of the decade.
China, India and other Asia-Pacific countries will be demand growth centres, with OECD countries' share of consumption forecast to fall to 41pc of the global total by 2030. It was 57pc in 2007. Oil consumption in China will be led by petrochemicals, while India will defy the global trend on road fuels with demand rising sharply.
Most production growth this decade comes from non-Opec+ producers, the IEA said. It projects the US and Canada to break annual records "throughout the seven-year period", and for Qatar to set a new output high in 2027.
