- The IEA forecasts that global oil demand will peak in 2029 and then decline due to advances in clean energy technologies and shifts in economic patterns, particularly in China.
- Citi analysts predict a significant drop in oil prices by 2025 due to a market surplus, advising investors to focus on short-term price movements rather than long-term investments.
- OPEC strongly opposes the IEA’s forecast, arguing that clean energy and EVs cannot fully replace oil in the energy mix and that there will be consumer pushback against ambitious net zero policies.
The International Energy Agency (IEA) published a staggering outlook on Crude Oil production and demand in their annual report. The IEA indicates a peak in Oil demand by the end of the decade, followed by a decline in demand, perhaps forever.
The IEA sees Oil demand reaching its peak in 2029 and beginning to fall due to clean energy technological growth. The IEA cites clean energy transition investment, the future of China’s economy, and a slowing of demand after its COVID surge as some of the catalysts for this prediction. In his statement that accompanied the report, IEA Executive Director Fatih Birol summarized, “As the pandemic rebound loses steam, clean energy transitions advance, and the structure of China’s economy shifts, growth in global oil demand is slowing down and set to reach its peak by 2030. This year, we expect demand to rise by around 1 million barrels per day,”
Citi (NYSE: C) analysts followed a similar sentiment on oil in a forecast predicting a significant price drop by 2025. The forecast cites an expected surplus in the market by 2025 due to large supply with falling demand. The forecast advises investors to capitalize on short-term movements in oil prices rather than longer term investments.
The Organization of Petroleum Exporting Countries (OPEC) strongly opposed the IEA’s outlook, mentioning that bearish predictions like these have been wrong in the past. In their statement, OPEC rebukes the predictions on falling demand and argues that consumer pushback is ahead regarding clean energy. OPEC writes, “many parts of the world are witnessing a consumer pushback as populations comprehend the implications of ambitious and unrealistic net zero policy agendas.”
Haitham Al-Ghais, General Secretary of OPEC reiterated is view, “OPEC welcomes all the progress made in renewables and EVs, it is nowhere near close enough to replace 80% of the energy mix,” adding, “We should also remember that the development of renewables and EVs requires some oil-related products. Their future expansion will add to oil demand.”
Saudi Arabia decided to not continue its “Petro-dollar” agreement with the United States. A critical point of United States influence in geopolitics, the agreement established and maintained the connection between the price of oil and the U.S. dollar for over 50 years. Saudi Arabia will now be able to sell oil in other currencies than the U.S. dollar including cryptocurrencies. For American investors, this move signals further uncertainty
Baker Hughes reports that the number of oil rigs in the United States fell by 4, bringing the total oil rig count to 488. This comes after the count fell by 4 last week. Last year at this time there were 552 oil rigs, 64 more than now. The drop this week is the 6th decrease in 8 weeks.