Oil demand may still be growing, but the forces shaping global markets are entering a new phase—one marked by structural shifts in consumption, regional trade realignments, and cautious investment strategies.
As geopolitical tensions escalate and clean energy technologies advance, Toril Bosoni, Head of the IEA’s Oil Industry and Markets Division, laid out the latest trends in the IEA’s Oil 2025 report during a recent podcast recording.
“We're seeing robust oil supply growth outpacing demand, even as economic and political volatility continues,” said Bosoni. “But that doesn’t automatically translate to long-term market stability.”
Despite diversification efforts, the Middle East remains central to global oil supply—accounting for 30% of both global oil production and trade. Each day, 17 million barrels of crude and 5 million barrels of refined products flow out of the region.
That dominance continues even as demand centers shift. Over the past decade, U.S. production surged by 8 million barrels per day, transforming the nation from the world’s largest importer into a net exporter. Meanwhile, China drove 60% of global oil demand growth during the same period.
But that growth story is changing. Chinese oil demand is expected to peak by 2027 as EV adoption accelerates, gasoline use declines, and economic shifts—including slower construction—reshape consumption patterns.
India and Southeast Asian economies—particularly Indonesia, Vietnam, Malaysia, Thailand, and the Philippines—are now poised to drive the next wave of demand, adding an estimated 2 million barrels per day by 2030.
The IEA still expects global oil demand to reach a plateau by the end of this decade. Demand is growing by about 700,000 barrels per day annually in the near term, but that growth will taper off.
By 2030, demand is projected to rise by only 2.5 million barrels per day in total. Meanwhile, production capacity is expected to increase by 5 million barrels per day—twice the amount needed—raising concerns about a potential supply glut.
Driving the demand slowdown:
While transport fuels are declining, sectors like petrochemicals and aviation are still expanding. Oil-based feedstocks like naphtha and ethane are crucial for plastics and synthetic fibers—areas less prone to substitution.
“Petrochemicals are more resilient to the pressures reducing transport demand,” Bosoni noted. “As urbanization and consumer demand grow, especially in emerging markets, this sector will remain a key demand driver.”
Upstream investment is expected to decline by 5–6% this year, falling to $420 billion globally. The decline reflects oil price drops earlier in the year, which dipped below $60 per barrel. Producers, especially in U.S. shale, are highly responsive to price volatility.
If prices stay near $80 per barrel, the U.S. could add an additional 600,000 barrels/day in supply. However, if they fall to $40, production could drop by more than 1 million barrels/day compared to current projections.
Despite current oversupply, energy security remains a concern. Inventory levels can offer a buffer, but supply chains remain vulnerable to geopolitical shocks.
“The global oil market is deeply interconnected,” Bosoni emphasized. “Chinese EV trends affect European refiners; U.S. shale decisions shape Middle Eastern strategy. You can’t analyze any one region in isolation.”
