According to Spencer Dale, chief economist at BP, oil demand in India is expected to stabilise by the mid-2040s if current trends continue.
He said global oil demand will level off until 2035, when it will start to decline. “On the current trajectory, the level of global oil demand in 2035 is exactly the same as the level of oil demand today. Oil demand will stagnate for the next 10 years or so,” Dale told reporters at a briefing. The findings are part of the BP Energy Outlook 2024 report.
While many parts of the emerging world continue to see increasing growth in oil demand, demand in developed regions, including the Organisation for Economic Co-operation and Development (OECD), has been declining over the past 15-20 years, he explained. “China’s oil demand is expected to start declining towards the end of this decade,” he said.
In June, the International Energy Agency (IEA) predicted that steadily increasing supplies of crude oil would outpace global demand, resulting in a market surplus by 2030.
The BP report shows that oil demand will decline most in road transport. This decline would come as a result of improvements in vehicle efficiency, in addition to rising sales of electric vehicles, Dale said. “In India, we have seen increasing electrification of electric two-wheelers, but now natural gas two-wheelers are playing a role. We are less certain whether the transition from oil-based vehicles will be driven primarily by electric or natural gas-powered vehicles,” he said.
Non-OPEC deliveries
On his near-term forecast for oil prices and supplies, Dale said global markets remain concerned about events in the Middle East.
“In terms of the fundamentals of the outlook, the consensus for the year ahead is that oil demand will continue to grow. But a lot of those external forecasts also point to strong growth in non-OPEC-plus supplies, with a lot of those scenarios suggesting that would largely meet overall demand growth,” the economist said.
The three main sources of production capacity growth in this list of countries are the United States, due to growth in US tight oil volumes, Brazil and Guyana, he said.
“That would mean that OPEC’s options to cut production capacity would be relatively limited,” Dale added.
OPEC is an intergovernmental organization of 13 major oil-producing countries, including Saudi Arabia, Iran, Iraq and Venezuela, and is considered a “cartel” by economists. Member countries accounted for an estimated 37 percent of global oil production and 79.1 percent of the world’s “proven” oil reserves in 2023. A loose alliance of 10 other oil-producing countries, led by Russia, is called OPEC-plus.
In June, OPEC+ countries agreed to extend two sets of voluntary production cuts. The group extended total production cuts to 5.86 million barrels per day (b/d), or 5.7 percent of global oil demand.
This includes a 3.66 million b/d production cut by one year to the end of 2025. It will also extend the 2.2 million b/d production cuts currently being implemented by eight countries, including Saudi Arabia and Russia, by another three months to the end of September. These were due to end in June but will now be phased out over a year from October 2024 to September 2025.
First publication: Aug 21, 2024 | 6:46 PM IST