Global Oil Demand to Peak in 2029 as China's Growth Slows and U.S. Consumption Rises

The global oil market is undergoing a significant transformation. For over a decade, the demand for oil has been primarily driven by China’s economic growth and the United States’ shale boom. However, according to the International Energy Agency’s (IEA) new medium-term outlook, this dynamic is 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.

The IEA forecasts that global oil demand will peak in 2029 at 105.6 million barrels per day (mbd) and begin to decline thereafter. At the same time, global production capacity is set to reach 114.7 mbd by 2030. This increasing surplus indicates an oversupplied oil market, barring supply shocks and political unrest.

China, once the major contributor to global oil consumption growth, is now projected to reach a demand plateau by 2027. The main reasons for this shift include rapid electric vehicle penetration, the 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.

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.

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.

Now, petrochemicals are the leading its consumers of oil where transportation fuels demand is almost no longer increasing and may start declining. The IEA expects that petrochemical production will consume one out of six barrels of oil in 2030. This change is very relevant in a changing landscape, particularly with refining, which, as indicated, is flattening while refinery capacity is expected to outproduce what we need. More closures and reductions are likely to occur over the next few years as the industry strives to rebalance production with demand while relieving potential overcapacity.

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.