July 20, 2024

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Major oil companies have received a stark warning that a major oversupply is expected by 2030

Major oil companies have received a stark warning that a major oversupply is expected by 2030

An aerial view taken on May 20, 2024 shows Petroleos Mexicanos' (PEMEX) Olmeca oil refinery, which along with six other refineries is part of the National Refining System (SNR) located in Paraíso, Tabasco state, Mexico.

Yuri Cortez | AFP | Getty Images

The U.S.-led increase in global oil production is expected to outpace demand growth between now and the end of the decade, the International Energy Agency said on Wednesday, pushing spare capacity to unprecedented levels and potentially upending OPEC+ market management.

These forecasts sparked a stern warning to major oil companies from IEA Executive Director Fatih Birol, who indicated that the world's largest energy majors may want to align their business strategies with the ongoing changes.

In its latest medium-term market report, Oil 2024, the global energy watchdog said oil demand growth is on track to slow before eventually reaching a peak of 106 million barrels per day by 2030. This is higher than Just over 102 million barrels. daily in 2023.

Meanwhile, the International Energy Agency expects total oil production capacity to rise to nearly 114 million barrels per day by 2030 – 8 million barrels per day more than projected global demand.

This will lead to levels of spare capacity not seen before – other than at the height of coronavirus lockdowns in 2020, the IEA said.

He warned that these dynamics could have “serious consequences” for oil markets, including the US shale industry and the OPEC and non-OPEC producing economies.

“With the pandemic recovery losing momentum, progress in clean energy transitions, and the structure of the Chinese economy transforming, global oil demand growth is slowing and is set to peak by 2030,” the IEA’s Birol said in a statement.

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He added: “This report’s forecasts, based on the latest data, show the emergence of a significant oversupply this decade, which suggests that oil companies may want to ensure that their business strategies and plans are prepared for the ongoing changes.”

An oil pump is seen near the nearby Callon Petroleum area on March 27, 2024 in Monahans, Texas.

Brandon Bell | Getty Images News | Getty Images

The report comes as countries seek to move away from fossil fuels, with momentum behind clean, energy-efficient technologies growing. Burning fossil fuels such as coal, oil and gas is The main driver of the climate crisis.

The share of fossil fuels in global energy supplies has remained at about 80% for decades, according to the International Energy Agency, although… You expect This percentage is expected to decrease to about 73% by 2030.

Demand for oil in developed economies to decline further

Despite the expected slowdown in oil demand growth, the IEA noted that in the absence of stronger policy measures or behavioral changes, crude oil demand is still expected to be about 3.2 million barrels per day higher by 2030 than it was in 2023. .

This growth is largely driven by strong demand from fast-growing economies in Asia, as well as the aviation and petrochemical sectors, it said.

However, in advanced economies, the International Energy Agency says oil demand is on track to fall to below 43 million bpd by 2030, down from nearly 46 million bpd last year. Aside from the coronavirus pandemic, the IEA said the last time oil demand from advanced economies reached this low was in 1991.

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At a milestone in 2021 In its report, the IEA urged against developing new oil, gas or coal projects if the world wants to achieve net zero by 2050.

The findings of this report have been widely criticized by many OPEC+ producers, who call for dual investment in hydrocarbons and renewable energy, so that green energy can unilaterally meet global consumption needs.

OPEC+, led by Saudi Arabia, refers to an influential energy alliance made up of OPEC and non-OPEC partners.