Oil Supply is Growing, but is Demand Keeping Up?

Over the longer term, oil demand growth is expected to slow, shifting toward emerging economies and petrochemicals while demands in OECD countries and transportation use declines. This widening gap between rising supply and plateauing demand signals a more volatile market—new risks for investors, businesses, and policymakers navigating the energy transition

Why It Matters? 

• Investors: oil prices may weaken, affecting returns and highlighting the need to integrate additional risks into investment strategies 

• Businesses: oversupply can pressure margins for producers and accelerate the shift toward electrification and low-carbon alternatives across supply chains 

• Policymakers: coordinated energy and industrial policy is essential to manage market volatility, ensure energy security and sustain momentum toward climate-aligned growth 

How is recent oil supply forecast changing? 

The U.S. Energy Information Administration (EIA) recently revised its oil output forecast after higher-than-expected production in July. Several offshore projects in the Gulf of Mexico are ramping up faster than anticipated, supported by policy moves to boost domestic energy production. 

The U.S. is not alone in this trend. Both the EIA and the International Energy Agency (IEA) have raised their global oil supply forecasts, though they differ on what’s driving the increase. The EIA expects most growth to come from non-OPEC producers such as the U.S., Brazil, and Canada, while the IEA sees OPEC+ countries adding more barrels after easing voluntary output cuts. 

Despite higher production, both agencies project relatively flat oil demand over the next decade. This mismatch, rising supply with stable demand, raises the risk of oversupply and renewed downward pressure on oil prices. 

What does the global oil outlook look like long term? 

According to several recent forecasts, oil demand is expected to decline gradually over the coming decades, even as production remains high. The composition of demand is also changing, both across regions and industries. 

How is oil demand changing by region? 

Between 2019 and 2024, oil demand grew by about 0.6 million barrels per day (Mb/d) each year, driven entirely by emerging economies. This trend will likely continue. 

Asia will remain the main growth region. India’s demand could rise by 1 Mb/d by 2030, the largest increase of any single country, while Southeast Asian economies will see significant growth as well. Overall, non-OECD oil demand is projected to increase by 1.2% per year, adding a total of 4.2 Mb/d by 2030, supported by rising incomes and living standards. By contrast, OECD consumption is expected to fall by 1.7 Mb/d throughout the same period, and China’s demand—which drove half of global growth over the past decade—is set to plateau by the late 2020s. 

In short: oil demand growth is shifting toward emerging markets outside China, led by India and Southeast Asia, while advanced economies face structural declines. 

How is demand changing by industry? 

The petrochemical sector is becoming the largest driver of oil demand growth, accounting for most remaining oil demand gains. On the other hand, transportation demand is beginning to decline mainly due to electrification and efficiency gains, in additional with customer behavior changes and public transportations. 

What is happening to road fuel demand? 

Today, road transport accounts for about 40% of total oil use, the largest source of oil demand. Over the next decade, however, demand is expected to fall as vehicles become more efficient and electric vehicles (EVs) expand. 

Globally, EVs are on track to displace more than 5 Mb/d of gasoline and diesel by 2030. Remote work and new mobility habits are also reducing commuting-related fuel use. Since 2019, substitutions such as EVs, rail, and gas trucks have already avoided about 1.2 Mb/d of oil demand growth in China alone, with another 2.5 Mb/d expected by 2030. 

The IEA’s Global EV Outlook reports that EV sales exceeded 17 million units in 2024 and are expected to surpass 20 million in 2025, about one-quarter of all new car sales. China accounts for over half of global EV sales, while growth in the U.S. and EU remains closely tied to emissions regulations. 

Two opposing forces are shaping the future of oil in transport: rising prosperity in emerging markets, which boosts mobility demand, versus accelerating electrification and efficiency, which reduces it. The latter is increasingly offsetting the former. 

How Is Demand Shifting in Petrochemicals? 

As transportation sector, along with power sector, diversify toward cleaner alternatives, petrochemicals are set to become the dominant source of oil demand growth from 2026 onward. 

Oil use as a petrochemical feedstock has nearly doubled since 2000, accounting for roughly one-quarter of total oil demand growth between 2000 and 2023. This rise is mainly driven by plastics, which make up about 70% of petrochemical oil use. 

By 2030, global production of polymers and synthetic fibers is expected to require 18.4 Mb/d of oil, according to IEA’s estimation. Without growth from petrochemicals, especially plastics productions, global oil demand could peak as early as 2027. 

Source 

BP Energy Outlook 

EIA Short-Term Energy Outlook 

IEA Oil 2025—Analysis and forecast to 2030