IEA: Could Oil Supply Crush Demand by 2030?

Global oil markets are heading into unfamiliar territory.

While the Israel-Iran conflict keeps immediate energy risks in sharp focus, the International Energy Agency’s (IEA) Oil 2025 outlook sets a broader view, suggesting that oil supply will grow faster than demand through the end of the decade.

That shift, underpinned by evolving trade patterns, regulatory pressure and changing demand from key sectors, is set to reshape the oil supply chain worldwide.

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 finds that global oil demand is set to rise by 2.5 million barrels per day (mb/d) from 2024 to 2030, reaching 105.5 mb/d by the end of the decade, but this increase is front-loaded.

After 2026, demand flattens before a projected contraction in 2030. Behind this slowdown are weaker economic forecasts, rising EV use and a shift towards renewables and natural gas, especially for electricity generation.

Transport and power generation, once the dominant users of oil, are expected to level off. Saudi Arabia, for example, is replacing oil-fired power with gas and renewables.

In parallel, the global EV market continues to expand, with sales expected to top 20 million in 2025. This trajectory is forecast to displace 5.4 mb/d of oil demand 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 projected to rise by more than 5 mb/d, hitting 114.7 mb/d by 2030. The main growth comes from the US, Canada, Brazil, Guyana, Argentina and members of the OPEC+ alliance. Notably, most of this increase is from NGLs and other non-crude liquids, reflecting the petrochemical sector’s needs.

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.

Refineries under pressure as trade flows shift

The refining sector faces structural shifts. Net global refining capacity is set to surpass demand by 2030, risking closures, particularly in regions with high operational costs. This overcapacity is driven by falling demand for refined products and rising NGL consumption for petrochemicals.

European refiners face mounting challenges. Under the European Union’s Emissions Trading System (EU-ETS), compliance costs are rising fast. The price of emissions allowances has more than doubled since 2021 and by 2030 free allowances will be down more than 40% from 2020 levels. These higher costs, combined with volatile natural gas prices, push refiners to invest in green hydrogen and improve efficiency.

Shipping also feels the impact as the EU-ETS now includes maritime transport, making 100% of intra-EU emissions and half of extra-EU voyages subject to carbon costs. This increases freight expenses and reduces refinery export margins. With additional regulations like FuelEU Maritime and stricter sulphur rules on the horizon, demand for petroleum-based marine fuels is likely to drop. Complex coastal refineries may benefit, but simpler ones face mounting strain.

Trade flows are shifting in response. NGLs and petrochemical feedstocks dominate exports, while sanctions and regional policy shifts continue to shape who trades what and where. Russia and Venezuela, for example, are developing non-Western trade links and domestic supply capacity to avoid sanctions-related disruptions.

The IEA sees a well-supplied market to 2030, assuming no major disruptions. That said, with so many moving parts, from EV uptake to sanctions and emissions rules, oil markets must adapt quickly.

For industry stakeholders, the organisation says that flexibility, diversification and investment in low-carbon technologies will be central to navigating the years ahead.

Explore the latest edition of Supply Chain Digital Magazine and be part of the conversation at our global conference series, Procurement & Supply Chain LIVE.

Discover all our upcoming events and secure your tickets today. 

Supply Chain Digital is a BizClik brand.