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The demand for oil will continue growing until 2028

The IEA published its medium-term market report on Oil 2023, in which it noted that world oil demand will rise by 6% between 2022 and 2028 and reach 105.7 million barrels per day that year. Regarding this year's estimate, the IEA revised its demand estimate upwards by 250,000 b/d compared to last month's estimate, reaching 102.25 million b/d.

With the start of vehicle electrification, the IEA forecasts a decline in oil use for transportation after 2026. Therefore, much of the growth in global demand will come from petrochemical feedstock and air travel use, with China and India being the leading countries in the growth of oil demand.

oil production platflorm
Oil demand will continue growing until 2028

Oil supply and production

Oil-producing countries outside the OPEC+ alliance dominate plans for increasing global supply capacity in the medium term, with an expected rise of 5.1 mb/d by 2028 led by the United States, Brazil, and Guyana.

“Saudi Arabia, the United Arab Emirates and Iraq lead the plans for capacity building within OPEC+, while African and Asian members are set to struggle with continuing declines, and Russian production falls due to sanctions. This makes for a net capacity gain of 0.8 mb/d from the 23 members in OPEC+ overall over the report’s forecast period”, said the IEA in a report.

The estimate of investment in oil and gas exploration and production was also presented, increasing to USD 528 billion this year, the highest since 2015.

In the refining sector, the overhang in global capacity has been reduced by waves of closures, conversions to biofuel plants, and project delays since the pandemic.

This, combined with a sharp drop in Chinese oil product exports and an upheaval of Russian trade flows, resulted in record profits for the industry last year.

While the amount of net refinery capacity additions by 2028 is expected to outpace demand growth for refined products, diverging trends among products mean that a repeat of the 2022 tightness in middle distillates cannot be ruled out.

The global refining industry will experience a marked change in the 2022-28 period, as demand for fuel for road transport peaks and demand for jet fuel continues to grow, the IEA said. Total refining capacity is on track to grow by 4.4 million b/d on a net basis through 2028, with most of the increase coming east of Suez and, in particular, in China. Excess global refining capacity is estimated at 8 million b/d in 2028.

It is trusted that the demand for oil in China will continue to grow

Sheikh Nawaf al-Sabah said that he remains optimistic about China's oil demand, expecting it to continue growing in the second half of this year and the next few years. More details from this podcast were outlined in an Argus note, in which the chief executive of Kuwait's state-owned KPC mentioned that China's oil demand recovery has been "consistent" since the start of this year, based on continued strong interest in Kuwaiti crude from Chinese refiners."

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