Yahoo Finance Oil demand growth to drastically slow down by 2028, says IEA
Oil demand growth is set to significantly slow by 2028, with a peak to take place before the end of the decade.
According to the International Energy Agency (IEA), the use of oil for transport will go into decline after 2026 thanks to the use of more electric vehicles, an increase in biofuels, and reduced consumption.
It predicted on Wednesday that demand growth in China is also forecast to slow from next year onwards, particularly as the rebound in demand after the pandemic subsides.
“The downturn in advanced economies renders the global outlook even more dependent on China’s post-COVID pandemic reopening being able to maintain its early momentum, which should eventually lift global trade and manufacturing,” the agency said,
It highlighted that Beijing’s “pent-up” consumption will peak mid-2023 after a 1.5 million-barrels-per-day rebound but lose momentum to just an average 290,000 barrels per day year-on-year from 2024 to 2028.
However, overall consumption is expected to be supported by strong petrochemicals demand, its new medium-term report said. Consumption in 2024 will grow at half the rate seen in the prior two years, it added.
Read more: FTSE 100: Shell to cut spending and raise dividends
Higher prices, and concerns about security of supply after Russia’s invasion of Ukraine, will also speed the shift towards cleaner energy technologies and away from fossil fuels.
The IEA has forecast that global oil demand will rise by 6% between 2022 and 2028 to reach 105.7 million barrels per day, amid robust demand from the petrochemical and aviation sectors.
But annual demand growth is expected to shrink from 2.4 million barrels per day this year, to just 0.4 million per day in 2028.
“The shift to a clean energy economy is picking up pace, with a peak in global oil demand in sight before the end of this decade as electric vehicles, energy efficiency and other technologies advance,” IEA executive director Fatih Birol said.
She added that oil producers need to pay “careful attention to the gathering pace of change” and calibrate their investment decisions accordingly, to “ensure an orderly transition.”
It comes as Shell (SHEL.L) announced today that it is scrapping its plans to cut oil production in the coming years, as it increased its dividend by 15% this year.
It is now looking to keep the amount of oil that it extracts from wells around the world at the same level as today.
The oil major plans to increase shareholder distributions to 30-40% of cash flow from operations, up from a previous target of 20-30%.
Brent crude (BZ=F) rose 1.5% at the time of writing to $75.38 (£59.62) a barrel on the back of the news and IEA report.
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