Paraiso, Tabasco State, Mexico – A recent report from the International Energy Agency suggests that a surge in global oil production, led by the United States, is expected to surpass demand growth by the end of the decade. This increase in production is forecasted to create unprecedented levels of spare capacity, potentially disrupting OPEC+ market management.

The IEA Executive Director, Fatih Birol, issued a stern warning to major oil companies, urging them to realign their business strategies with the changing landscape of the energy market. The agency’s latest medium-term market report, titled Oil 2024, projects a slowdown in oil demand growth, reaching a peak of nearly 106 million barrels per day by 2030, up from just over 102 million barrels per day in 2023.

By 2030, total oil production capacity is expected to rise to nearly 114 million barrels per day, a significant 8 million barrels per day higher than the projected global demand. This surplus in production capacity has not been seen since the height of the Covid-19 lockdowns in 2020, raising concerns about the implications for the oil market, including the impact on the U.S. shale industry and producer economies in OPEC and beyond.

As the world transitions towards clean energy technologies and away from fossil fuels, the IEA emphasizes the need for countries to reduce their reliance on oil, coal, and gas. The burning of fossil fuels remains a key driver of the climate crisis, with the IEA projecting a decrease in the share of fossil fuels in the global energy supply from 80% to 73% by 2030.

While oil demand is expected to continue growing in fast-growing Asian economies, as well as in the aviation and petrochemical sectors, advanced economies are projected to see a decline in oil demand. The IEA expects oil demand in advanced economies to drop below 43 million barrels per day by 2030, down from close to 46 million barrels per day in 2023.

In a significant report released in 2021, the IEA called for a halt to new oil, gas, or coal developments to achieve net zero emissions by 2050. This recommendation received pushback from OPEC+ producers, who advocate for a dual investment approach in both hydrocarbons and renewables until renewable energy can fully meet global consumption needs. Led by Saudi Arabia, OPEC+ is a collaborative energy alliance composed of OPEC and non-OPEC partners.

Overall, the IEA’s projections paint a picture of a changing energy landscape, with implications for oil markets, major oil companies, and global efforts to combat climate change. The report underscores the need for strategic planning and investment in clean energy technologies to address the evolving energy needs of the future.