The oil mystery that has the world on edge

The International Energy Agency and OPEC have often diverged in their outlook for the oil market. The differences in their forecasts, however, have rarely been as wide as they are today., released last week, the IEA depicted a “staggering” surplus of oil – 8 million barrels a day – by the end of this decade as oil companies increase production in the face of waning demand.

The IEA sees oil demand peaking by 2029 and starting to fall in 2030 as the roll-out of EVs and other clean energy technologies accelerates. It thinks oil demand will be 105.4 million barrels a day in 2030 but production will be about 113.8 million barrels a day.That would be the biggest surplus of supply over demand since the pandemic. Demand in 2030 in advanced economies of less than 43 million barrels a day – three million barrels a day less than last year -- would be its weakest since 1991.

Earlier this month, however, the cartel extended the cuts through to the end of next year while, at the same time, allowing some of its key members to unwind some of their “voluntary” cuts over the course of 2025. The two agencies’ mixed records on forecasting supply and demand are due to the unpredictability of the events that move a market extremely sensitive to external influences.

In the longer term, the pace at which the world, particularly the developed world and China, move towards net zero emissions will shape both sides of the supply and demand equation and the take-up of EVs and investment in clean energy generation will play a major role.The IEA says global investment in clean energy technologies and infrastructure will reach $US2 trillion this year, against “only” $US1 trillion invested in oil, gas and coal.

Trump plans a 60 per cent tariff on all Chinese manufactured products and would remove the Biden subsidies and incentives for green technologies.

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The oil mystery that has the world on edgeIt is one of the world’s most important markets and powerbrokers are widely split on what its future looks like.
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