IEA Confirms Oil Markets Will Stay Oversupplied as Global Demand Peaks by 2029

The global oil market is on the brink of a major transition. For over a decade, demand growth has been heavily driven by China’s economic surge and the United States’ shale boom. But according to the International Energy Agency’s (IEA) new medium-term outlook, the script is now changing. While global oil demand will continue to grow modestly until the end of this decade, the pace is slowing, and a peak may arrive sooner than many expected.

Amid heightened geopolitical tensions and transitions to electrified economies, the IEA posits that oil markets are beginning a structurally different era. The IEA forecasts that global oil demand will peak in 2029 at 105.6 mbd and begin to decline thereafter. At the same time, global production capacity is set to reach 114.7 mbd by 2030. And this increasing surplus indicates an oversupplied oil market, barring supply shocks and political unrest.

China’s Oil Demand to Peak in 2027 Due to EV Surge

China is now perhaps the most influential change in the oil supply landscape. Once the major contributor to oil consumption growth in the world, China is now projected to reach a demand plateau by 2027. The main reasons? Rapid electric vehicle penetration, development of high-speed rail, and a rising trend in shipping using natural gas instead of oil.

The IEA has assessed that oil use in China will be only slightly above oil use in 2024, in 2030. This represents a massive reduction from the 2024 1 million bpd growth projected just a year ago. Supply and demand leverage can quickly change the scope and velocity with which technology and government policy is reshaping the energy landscape – especially in rapidly evolving economies.

U.S. Oil Demand to Remain Resilient Amid Cheaper Gas and Slow EV Growth

While a slowdown in China’s demand may be unfolding, the United States paints a different picture. The IEA has revised its forecast of U.S. oil consumption in 2030 upward by 1.1 million bpd. Two main elements contributed to the revised upward consumption projection: low gasoline prices and electric vehicle adoption being slower than anticipated. 

In 2024, EV sales have plateaued in the U.S., and this year’s forecast for 2030 EVs will only represent 20 percent of car sales compared to last year’s estimate of 55 percent. Also, a political shift with the Trump administration rolling back regulations that encouraged an emphasis on electric vehicles has solidified the reliance on oil.

Oil Supply Set to Outpace Demand Even During Global Uncertainty

Whatever those more significant regional divergences, the overall narrative remains intact, supply is expanding at a faster rate than demand. The IEA estimates global production capacity growth of over 5 million barrels per day (bpd) by 2030 all contributed from the US, Canada, Brazil, Guyana, and Argentina. Aside from OPEC+ beginning to slowly release production from existing cuts, it is anticipated this supply increase will surpass demand increase.

There are also expected contributions from non-crude liquids including natural gas liquids (NGLs). The IEA said much of this addition will come from upstream petrochemical feedstock growth, not from fuel production; though IEA also acknowledged rising geopolitical uncertainty and risk, specifically in the Middle East region including Israel and Iran, could influence the overall supply outlook for oil, which appeared otherwise stable.

Petrochemicals to Dominate Oil Demand Growth From 2026 Onwards

Petrochemicals have now emerged as the leading consumers of oil, overtaking transportation fuels whose demand is beginning to plateau and may soon decline. According to the IEA, petrochemical production is expected to consume one out of every six barrels of oil by 2030. This structural shift is highly relevant in the current energy landscape, particularly for the refining sector. With demand for refined transportation fuels stagnating, refinery capacity is projected to outpace actual needs, setting the stage for more shutdowns and production cuts in the coming years as the industry scrambles to avoid overcapacity and align output with demand.

Despite President Trump denying all reports of proposing an Iran peace deal, oil prices have risen a modest +1.4%. The market reaction remains measured. We are far from the brink of “World War 3.” If anything, the smart money is betting on a diplomatic resolution, and oil traders seem to agree. Volatility persists, but the fundamentals still point to an oversupplied market, with ample capacity to absorb shocks unless there’s a major geopolitical escalation.

Image 1: Crude Oil WTI, Source: The Kobeissi Letter, published on 17th July 2025

Oversupply Looms but Geopolitical Risks Keep Market on Edge

The IEA’s latest data delivers a clear message: the oil market may remain well supplied through 2030, thanks to soaring production and a plateau in global oil demand. China’s early peak, the U.S.’s unexpected resilience, and the rise of petrochemicals collectively indicate a reshaped market landscape.

However, the situation is not wholly assured. The equilibrium of this balance could readily be disrupted by geopolitical shocks or sudden shifts in energy policy. As the world moves towards newer energy forms, it will be up to the oil industry to manage that volatility while preparing for a future where electric vehicle uptake and cleaner fuels become commonplace.