World facing 'staggering' supply surplus as demand for oil peaks - IEA

The world is facing a "staggering" oil supply surplus, a leading energy think tank warned on Wednesday, as output outstrips slowing demand.

Publishing its annual report into the oil industry, the Paris-based International Energy Agency forecast a surge in global production in the coming years.

The US and other producers in the Americas are expected to lead the increase, the reported noted, with total capacity anticipated to reach nearly 114m barrels per day by 2030. However, in contrast, demand was forecast to fall over the same period.

While demand from fast-growing economies in Asia and the aviation and petrochemical sectors was likely to remain strong, the IEA warned, that would be offset by the growing green energy transition, including a rise in electric car sales.

As a result, global oil demand is forecast to "level off" 106m bpd towards the end of the decade, leaving supply capacity at a "staggering" 8m bpd above demand.

"This would result in levels of spare capacity never seen before other than at the height of the Covid-19 lockdowns in 2020," the report warned.

"Spare capacity at such levels could have significant consequences for oil markets, including for producer economies in Opec and beyond, as well as for the US shale industry."

Demand averaged just over 102m bpd in 2023.

Fatih Birol, IEA executive director, said: "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 is set to reach its peak by 2030.

"The report’s projections, based on the latest data, show a major supply surplus emerging this decade, suggesting oil companies may want to make sure their business strategies and plans are prepared for the changes taking place."

In particular, the report said the surplus could "upend" efforts by Opec and its allies to continue managing the market, leading to lower prices.

It continued: "A lower price environment would ultimately challenge the US shale industry, traditionally the fastest respondent to changing market circumstances.

"How the industry will adapt and adjust to the new supply landscape will have wide-ranging consequences for producers and consumers globally through the remainder of the decade and beyond."

The IEA, which was set up in the 1970s to advise on energy security, said last year that the world was at the "beginning of the end" of the fossil fuel era. However, producers - especially those in the US shale industry and in the Middle East - are continuing to increasing investment in crude extraction.