The global demand for oil is projected to rise until 2028

The global demand for oil is projected to rise until 2028, driven significantly by the petrochemical sector, which could account for over 40% of this growth. The economic climate in China will play a crucial role, influencing trends in Asia and Latin America. For those investing with Ecotrader, it's important to consider the following about oil demand: Despite the ongoing energy transition, featuring enhanced efficiency standards, the rapid adoption of electric vehicles, and economic structural shifts, the demand for oil, particularly for automotive use, is expected to peak soon. This is due to the increasing preference for natural gas and renewables in power generation, alongside reduced oil consumption attributed to remote work and widespread use of video conferencing in developed nations. According to the International Energy Agency, peak oil use in vehicles is anticipated in 2023, with a decline in other transport fuels to follow by 2026.

By 2028, electric vehicles are expected to constitute over a quarter of the 26 million total vehicle sales, leading to a significant reduction in gasoline and diesel consumption. China, a major market for electric vehicles and a leading CO2 emitter, will play a significant role in this shift. Fuel efficiency improvements are likely to be the most impactful factor in reducing oil demand. Meanwhile, several countries, including oil-rich nations like Saudi Arabia, Kuwait, and Iraq, are planning to transition away from oil-dependent power generation.

In light of these trends, total oil consumption may continue to grow until 2028, fueled by the expanding demand for petrochemical products. While oil usage might decline in advanced economies, global demand is expected to rise, driven by growth in developing countries, especially in Asia, where India might surpass China as the primary contributor to this increase by 2027.

In the short term, by 2024, global oil demand could increase by 1.5 million barrels per day, a slight decrease from 2023's two million, due to a projected dip in global GDP growth to 2.8% from 3%. This includes a 0.2 million barrel per day reduction from developed economies, against a backdrop of economic growth and the energy transition. However, emerging economies' GDP growth could reach 4.1% in 2024, potentially boosting their oil demand by 1.7 million barrels per day. The economic outlook in China will be key, affecting the rest of Asia and Latin America. The Chinese government's measures to stimulate economic growth are promising, likely offering fiscal relief to local governments, boosting household confidence, and supporting local investment, which may also stabilize the real estate sector and lessen its drag on the economy in 2024.

Regarding supply, OPEC+, despite some adherence challenges to voluntary cuts, is expected to continue limiting its output to avoid scenarios like the December 1998 crash when Brent crude fell below ten dollars per barrel. Non-OPEC+ countries are projected to add 1.3 million barrels per day in 2024, which won't suffice to meet the additional demand. The disciplined investment approach of U.S. companies suggests a cautious increase in production, with non-OPEC+ supply likely growing steadily throughout 2024, peaking towards the year's end, primarily from deep-water projects in Brazil and Guyana, and to a lesser extent, U.S. shale.

Consequently, Brent crude prices might hover around $90 in the first half of 2024, driven by demand in emerging economies, especially China. However, a slight surplus in supply could lower prices to around $80 by year-end. This forecast could be adjusted downward if non-OPEC+ supply exceeds expectations or if China's economic growth falters.

Related discussions include challenges faced by Britain's largest untapped oil field, the sudden drop in oil demand signaling an industry revolution and collapse, and the U.S. surpassing OPEC in oil production, challenging Saudi Arabia's dominance.