Oil Demand Growth to Slow Almost to a Halt in Coming Years: IEA
by Rocky Teodoro
click here to read the original article at Rigzone.com
*this article was not written by Roseland Oil & Gas
The use of oil for transport fuels will decline after 2026, and growth in oil demand will “slow almost to a halt in the coming years”, the International Energy Agency (IEA) has said.
The IEA’s “Oil 2023” report released Wednesday projects global oil demand to grow six percent between 2022 and 2028 to reach 105.7 million barrels per day (million bpd), up 5.9 million bpd compared to 2022 levels, supported by strong demand from the petrochemical and aviation sectors. However, annual demand growth will drop from 2.4 million bpd in 2023 to 0.4 million bpd in 2028, the report said.
Demand for oil from combustible fossil fuels, which excludes biofuels, petrochemical feedstocks, and other non-energy uses, is set to peak at 81.6 million bpd in 2028, the report said, adding that “this milestone marks a historic pivot towards lower-emission sources”.
“The shift to a clean energy economy is picking up pace, with a peak in global oil demand in sight before the end of this decade as electric vehicles, energy efficiency, and other technologies advance”, IEA Executive Director Fatih Birol said. “Oil producers need to pay careful attention to the gathering pace of change and calibrate their investment decisions to ensure an orderly transition.”
Demand Projections
Expansion in global oil demand will be powered by faster-growing economies in the developing world, especially Asia, the report said. Around three-quarters of the increase in the six-year period to 2028 will come from Asia, with India surpassing China as the main source of growth by 2027. Meanwhile, oil demand in North America and Europe, where energy transition policies and efficiency gains will be most pronounced, will be in “contractionary mode” for most of the period, the report said.
China, which is experiencing a post-pandemic rebound in oil demand in the first half of 2023, will see demand growth slow from 2024 onward. However, the global petrochemical sector will remain the key driver of global oil demand growth, with liquified petroleum gas (LPG), ethane, and naphtha accounting for more than half of the increase between 2022 and 2028 and nearly 90 percent of the increase compared with pre-pandemic levels. The aviation sector will also expand strongly as airline travel returns to normal following the reopening of borders, according to the report.
Global upstream investments in oil and gas exploration, extraction, and production are set to reach their highest levels since 2015, growing 11 percent year-on-year to $528 billion in 2023, compared to $474 billion in 2022. The forecasted level of investment would be enough to meet demand in the six-year period to 2028, but would exceed the amount needed in energy transition targets for net zero emissions, the IEA said.
The report suggested that “refiners may need to shift their product yields towards middle distillates and petrochemical feedstocks to reflect changing demand patterns”. Demand for petroleum-based premium road transport fuels is forecast to be one million bpd below 2019 levels at the end of 2028. At the same time, robust petrochemical activity and slower growth in natural gas liquids supply will increase demand for refinery-supplied LPG and naphtha, the IEA predicts.
Oil-producing countries outside the OPEC+ alliance led by the USA, Brazil, and Guyana “dominate plans for increasing global supply capacity in the medium term” with a forecast increase of 5.1 million bpd by 2028, the report said.
For OPEC+ member nations, the expected net capacity gain is 0.8 million bpd in the six-year period to 2028, led by the United Arab Emirates, Saudi Arabia, and Iraq. African and Asian members will continue to see continuing declines, according to the report.
The report’s projections assume major oil producers maintain their plans to build up capacity even as demand growth slows, resulting in a spare capacity cushion of at least 3.8 million bpd, concentrated in the Middle East. However, several factors can still impact market balances over the medium term, including uncertain global economic trends, the direction of OPEC+ decisions, and China’s refining industry policy, the report noted.
In an earlier study, Bloomberg NEF predicted overall global oil demand for road transport to peak in 2027 as electric vehicle usage soars in the coming years. The usage of electric vehicles is already displacing demand for 1.5 million bpd of oil, and this displacement “rises dramatically in the years ahead”, the research firm said in its annual “Electric Vehicle Outlook” report.
by Rocky Teodoro
click here to read the original article at Rigzone.com
*this article was not written by Roseland Oil & Gas