BofA: Oil Demand Growth Has Peaked

Bank of America: the annual rate growth may have already peaked for crude oil.
Despite peak growth, global oil demand will continue to rise for years.
In the long term, OPEC sees robust demand and raised significantly its long-term estimate in its latest annual World Oil Outlook, with global oil demand seen at around 116 million bpd in 2045.

Global oil demand continues to rise and will keep increasing for years, but the annual rate growth may have already peaked, according to Bank of America.

Electrification of transport, energy efficiency, and slower economic growth would all combine to cap the growth rate in the coming years as demand growth is returning to more moderate levels from before the Covid slump.

In the three years following the pandemic hit to demand, global oil consumption saw a strong rebound as economies reopened and people returned to their typical ways of travel and consumption.

At the height of the pandemic gloom about demand, many analysts even said that oil demand would never recover to return to 2019 levels.

Not only did it recover, but global consumption is now at a record high and will continue posting records in the coming years.

Despite estimates that we may never see the growth rates of the past three years, oil demand is set to keep rising as demand in emerging markets grows and offsets flat-lining consumption in some of the most developed economies.

“Growth Rate Has Likely Peaked For Good”

“Following a 2.3mn b/d or 2.3% expansion in 2023, oil consumption will likely continue to grow into 2030, but the rate of oil demand growth has likely peaked for good,” Bank of America analysts led by commodity strategist Francisco Blanch wrote in a recent note carried in Business Insider.

“[A]t 600k b/d YoY on average, oil demand growth into the end of the decade should be a fraction of the rate observed in the past three years,” the bank’s strategists note.

With the rebound in demand that started in 2021, it’s no surprise that the growth rate is slowing to more moderate levels.

For oil producers and consumers, the fact is that despite slower growth rates, global demand will keep increasing this decade and probably after 2030, too.

IEA vs OPEC Demand Forecasts

The International Energy Agency (IEA) begs to differ.

According to the Paris-based agency, which advocates for faster energy transition, demand for all fossil fuels – oil, natural gas, and coal is set to peak before 2030, which undermines the case for increasing investment in fossil fuels.

This prediction resulted in a public rebuke from OPEC, which dismissed last year the IEA’s claims of the “beginning of the end of fossil fuels.” Since the autumn of 2023, OPEC has criticized the agency several times for the “dangerous” narrative that peak demand this decade wouldn’t need investments in new supply.

OPEC Secretary General Haitham Al Ghais said in September that “Such narratives only set the global energy system up to fail spectacularly. It would lead to energy chaos on a potentially unprecedented scale, with dire consequences for economies and billions of people across the world.”

More recently, Al Ghais wrote in an article published on OPEC’s website last month that since the start of oil exploration, the industry has seen a “history of ‘unrealized’ peaks” for both supply and demand.

“Today, what is clear is that peak oil demand is not showing up in any reliable and robust short- and medium-term forecasts,” Al Ghais said.

In the short term, OPEC sees oil demand growth of 4.7 million bpd over the two years 2023 and 2024 combined, with other analysts such as ESAI at over 4 million bpd too, and Rystad and Argus close to this level. Even the IEA sees growth of 3.4 million bpd over the 2023-24 period, the official noted.

“Given these growth trends, it is a challenge to see peak oil demand by the end of the decade, a mere six years away,” OPEC’s secretary general said.

In the long term, OPEC sees robust demand and raised significantly its long-term estimate in its latest annual World Oil Outlook, with global oil demand seen at around 116 million bpd in 2045, up by 6 million bpd compared to the previous assessment from 2022. OPEC expects global oil demand to increase by more than 16 million bpd between 2022 and 2045, rising from 99.6 million bpd in 2022 to 116 million bpd in 2045.

Even as China’s demand growth slows, India will emerge as the top driver of global oil consumption growth, according to OPEC, Bank of America, and many other forecasters and analysts.

Peak oil demand is not happening by 2030, OPEC’s Al Ghais wrote, due to policymakers re-evaluating their approach to energy transition pathways and due to a pushback from consumers. Faster industrialization in developing countries and the emergence of a larger middle class there, an expansion in transport services, and greater energy demand and access are also factors preventing peak oil demand this decade, according to OPEC’s secretary general.

“After all, crude oil and its derivatives are a constant presence in our daily lives, bringing vital everyday products, and helping to deliver on energy security and energy access in a widely available and affordable way,” Al Ghais wrote.

“Time and again, oil has defied expectations regarding peaks. Logic and history suggest that it will continue to do so.”

By Tsvetana Paraskova for Oilprice.com