IEA: How is Sustainability Changing Oil Demand?
Global oil markets are heading into unfamiliar territory.
While the Israel-Iran conflict is showing current energy vulnerabilities, the International Energy Agency's (IEA) Oil 2025 outlook presents a wider perspective: oil supply might outpace demand through the decade’s end, driven by the advancements in EV adoption, renewable energy and the reshaping of international trade patterns.
Fatih Birol, Executive Director of the IEA, explains: “When we look at oil market trends over the past decade, we see a remarkable double act – thanks to the shale revolution, the United States has accounted for 90% of oil supply growth worldwide, while 60% of the rise in global demand has come from China. But these dynamics are shifting.”
Demand slows as oil alternatives rise
The report projects global oil demand to grow by 2.5 million barrels per day (mb/d) from 2024 to 2030, peaking at 105.5 mb/d, but this increase is front-loaded.
Post-2026, demand stabilises, followed by a potential reduction by 2030.
Contributing factors include modest economic outlooks, uptick in electric vehicle usage and a noticeable pivot to renewable energy sources and natural gas, notably in electricity generation undertakings.
Traditionally oil-reliant sectors like transportation and power generation are decelerating in oil use.
For instance, Saudi Arabia is transitioning from oil-based power to combinations of gas and renewable energies.
The global electric vehicle industry is on an upward trend, with sales projected to exceed 20 million by 2025, reducing oil demand by 5.4 mb/d by 2030.
Petrochemicals now step in as the key demand driver. From 2026, they are set to account for most oil demand growth, with the industry consuming one in every six barrels by 2030.
Much of this stems from the production of plastics and synthetic fibres, supported by rising supplies of natural gas liquids (NGLs), especially in China and the United States.
At the same time, demand for combustible fossil fuels - excluding petrochemical feedstocks and biofuels - could peak as early as 2027.
Capacity climbs, but risks linger
Oil production capacity is anticipated to increase by more than 5 mb/d, reaching 114.7 mb/d by 2030, spearheaded by the US, Canada, Brazil, Guyana, Argentina and OPEC+ countries.
Notably, the bulk of this growth originates from NGLs and other non-crude liquids, reflecting the demands of the petrochemical industry.
OPEC+ sees net capacity growth of 2 mb/d, led by Saudi Arabia, the UAE and Iraq. Condensates and NGLs form more than 60% of this increase, with Saudi Arabia’s Jafurah gas field contributing heavily.
Kazakhstan also adds early capacity, while Mexico faces steep losses, with output forecast to fall by 630 kb/d.
The geopolitical landscape remains volatile. Sanctions on Iran, Russia and Venezuela curb access to finance, equipment and markets.
Yet, oil still flows—albeit through alternative routes.
Iran remains a top supplier to China, despite tighter US sanctions. Venezuela, dependent on diluents to blend its heavy crude, now sources these from Russia, Iran and China instead of traditional Western partners.
Russia’s oil production slipped further, with losses totalling 600 kb/d since the Ukraine invasion.
The Vostok Oil project has been delayed to 2026, hampered by sanctions and a lack of specialised equipment.
Nevertheless, Russia is working to localise supply chains by building its own rigs and fracking technologies.
The IEA envisions a well-equipped market through 2030, provided no significant disruptions occur.
Given the multifaceted influences and regulatory pressures, from EV growth to sanctions and emission norms, the oil markets are under pressure to adapt more rapidly.
Industry stakeholders are advised by the organization to prioritize agility, diversification and investment in low-carbon technologies to effectively navigate forthcoming challenges.
Explore the latest edition of Sustainability Magazine and be part of the conversation at our global conference series, Sustainability LIVE.
Discover all our upcoming events and secure your tickets today.
Sustainability Magazine is a BizClik brand.
