<article><p class="lead">Oil demand will continue growing up to 2028 but at a much slower pace than this year and will peak by 2030 as the energy transition gathers pace, according to the IEA.</p><p>In its medium term outlook <i>Oil 2023</i> the Paris-based energy watchdog estimates global oil demand growing from 99.8mn b/d in 2022 to 105mn b/d in 2028. Beyond that, the report's author Toril Bosoni said the agency is "pretty confident" demand would peak by the end of the decade.</p><p>For this year, the IEA revised up its demand estimate by 250,000 b/d compared with last month's estimate, to 102.25mn b/d. Demand in the second half of 2023 is now seen growing by an additional 380,000 b/d compared with the previous OMR. That brings its 2023 oil demand growth projections up to 2.45mn b/d, surpassing <a href="https://direct.argusmedia.com/newsandanalysis/article/2458851">Opec's latest estimate of 2.35mn b/d</a>.</p><p>But annual demand growth will slow to 900,000 b/d in 2024 and just 400,000 b/d by the end of the 2023-28 forecast.</p><p>"The slowdown has been hastened by Russia's invasion of Ukraine amid heightened energy security concerns and by governments' post-Covid recovery spending plans, with more than $2 trillion mobilised for clean energy investments by 2030," the IEA said.</p><p>Demand growth will be led by Asian economies, notably China and India, while the OECD "may crest its peak this year" mostly because of vehicle efficiencies and electrification. </p><p>Much of the global oil demand growth will come from continued increases in petrochemical feedstock and air travel use, both highly concentrated in Asia-Pacific, the agency said. LPG and naphtha demand is seen growing by 3.2mn b/d over 2022-28 and jet fuel by 2mn b/d, while gasoline demand is set to fall by 300,000 b/d.</p><h2>Supply to meet demand</h2><p>World oil supply capacity is estimated to rise by 5.9mn b/d to 111mn b/d by 2028, comfortably meeting the demand growth, the IEA said. Supply growth is dominated by the US shale and other producers in the Americas such as Brazil, Guyana and Argentina. </p><p>The IEA forecasts global upstream oil and gas investment to rise by 11pc to $528bn this year, the highest since 2015 and, the IEA said, sufficient to meet estimated demand growth between 2022-28. It sees the world's spare oil production capacity at 3.8mn b/d in 2028, mainly concentrated in the Middle East members of the Opec+ alliance, such as Saudi Arabia and the UAE that are undertaking large capacity addition projects. </p><p>"Given current investment and market trends, the Middle East's share of world oil production looks set to increase over the longer term," the IEA said.</p><p>But overall production capacity from the 23 members of the Opec+ alliance only rises by 800,000 b/d by 2028, weighed down by losses from smaller, non-Middle East members, as well as Russia. The latter's output capacity is seen falling by 700,000 b/d between 2021-28 because of western sanctions.</p><p>"Moscow's ability to self-finance its oil industry operations and its access to Chinese equipment and services may stave off a far steeper decline," the IEA said.</p><p>The global refining industry will undergo a marked change in the 2022-28 period, as road transportation fuel demand peaks and jet fuel demand continues to grow, the IEA said. This will prompt a structural shift towards middle distillate product yields and petrochemical feedstocks. Total refining capacity is on course to grow by 4.4mn b/d on a net basis up to 2028, with most of the increase coming East of Suez, and China in particular. Spare global refining capacity is seen at 8mn b/d in 2028.</p><p>The IEA caveats its forecast by noting several risks. </p><p>"Uncertain global economic conditions, the direction of Opec+ decisions and Beijing's refining industry policy will play a crucial role in the balancing of crude oil and product markets," it said.</p><p class="bylines">By Aydin Calik</p></article>
