Slowing demand growth and increasing supply are setting global oil markets on track for a significant surplus this decade.

According to the IEA’s new oil market outlook, the world’s demand for oil is expected to slow in the coming years as energy transitions advance, while global oil production is set to increase, easing market strains and pushing spare capacity to unprecedented levels outside of the Covid crisis. The latest edition of the IEA’s annual medium-term market report, Oil 2024, explores the implications of these dynamics for oil supply security, refining, trade, and investment.

The report projects that strong demand from fast-growing economies in Asia, along with the aviation and petrochemicals sectors, will continue to drive oil use higher in the coming years. However, these gains will increasingly be offset by rising electric car sales, fuel efficiency improvements in conventional vehicles, a decline in oil use for electricity generation in the Middle East, and structural economic shifts. As a result, global oil demand, which averaged just over 102 million barrels per day in 2023, is forecasted to level off near 106 million barrels per day towards the end of the decade.

Simultaneously, a surge in global oil production capacity, led by the United States and other producers in the Americas, is expected to outpace demand growth between now and 2030. The total supply capacity is forecast to rise to nearly 114 million barrels a day by 2030, which is 8 million barrels per day above projected global demand. This would result in levels of spare capacity unseen since the peak of the Covid-19 lockdowns in 2020. Such high spare capacity could significantly impact oil markets, including the economies of OPEC and other producers, as well as the US shale industry.