IEA: Oil oversupply ahead amid shifting demand

While global attention remains focused on the conflict between Israel and Iran and the immediate risks to energy supply security, the International Energy Agency (IEA), in its new “Oil 2025” report, has warned that in the medium term, global oil supply is set to far outpace demand growth—resulting in a well-supplied market but one filled with new uncertainties.

According to the report, global oil demand is expected to rise by about 2.5 million barrels per day (mb/d) between 2024 and 2030, reaching a plateau around 105.5 mb/d. Meanwhile, global supply is projected to climb above 114 mb/d, driven largely by increased production of natural gas liquids (NGLs) and other non-crude liquids. The growth in non-OPEC supply will be led by the United States, Canada, Brazil, Guyana, and Argentina, while the OPEC+ alliance has already started easing production cuts.

However, the dynamics that have shaped oil markets over the past 15 years are shifting. The United States, which once accounted for 80–90% of global supply growth thanks to the shale oil boom, is slowing down as companies scale back investments and focus on financial discipline. Meanwhile, China—long the engine of global demand—is expected to reach peak consumption as early as 2027, driven by soaring electric vehicle sales and increased use of high-speed trains and natural gas-powered transportation.

The IEA also notes that electric vehicles—projected to exceed 20 million units by 2025—will displace around 5.4 million barrels of oil demand per day by the end of the decade. This shift will be reinforced by the substitution of oil with gas and renewables in power generation, particularly in the Middle East.

On the demand side, petrochemicals will become the main growth driver starting in 2026, accounting for one in every six barrels consumed by 2030. In contrast, demand linked to fossil fuels (excluding biofuels and chemicals) could peak as early as 2027. This transition will also impact the refining sector, which may face overcapacity and potential closures.

“If we look at the oil market over the past decade, we see a dual phenomenon: thanks to the shale revolution, the U.S. accounted for 90% of global supply growth, while China was responsible for 60% of demand growth,” said IEA Executive Director Fatih Birol. “But these dynamics are changing. Based on fundamentals, oil markets appear set to be well supplied in the coming years—but recent events clearly highlight the significant geopolitical risks to oil supply security. When it comes to energy security, there is no room for complacency. The IEA remains fully committed to working with energy producers and consumers to safeguard energy security,” he added.