Rystad Energy projects that the global oil market will experience supply corrections through 2030, with a potential oversupply situation emerging by the mid-2030s as demand remains resilient.
This forecast comes amid expectations of medium-term volatility under a possible Trump 2.0 administration.
Mukesh Sahdev, Global Head of Commodity Markets – Oil at Rystad Energy, describes 2023 as a “turning point” for the oil market.
He attributes this to the super-election cycle, geopolitical conflicts, and OPEC+ supply cuts aimed at addressing lower-than-expected demand growth and higher non-OPEC+ supply.
“The structural shift in demand stemmed from two main factors: The lasting effects of the pandemic and the growing focus on the energy transition,” Sahdev explains.
He estimates that these factors have reduced demand by approximately five million barrels per day compared to a scenario without COVID-19 or the energy transition.
Looking ahead, Sahdev predicts that “supply corrections are expected through 2030, with the market reaching an inflection point by the mid-2030s, when supply corrections may begin to overshoot demand as demand remains relatively sticky”.
The potential imbalance between supply and demand is expected to vary across regions and sectors. Asia and Europe are projected to remain in deficit, while the Middle East and North America will likely maintain a surplus position.
In the event of a Trump 2.0 administration driving growth beyond one million barrels per day, Rystad Energy anticipates a significant price impact.
This could potentially check non-US, non-OPEC growth, as less than 10 per cent of the growth is expected to come from producing wells.
OPEC+ is expected to play a crucial role in market management.
The unwinding of OPEC+ barrels could potentially reduce oil prices by around US$20 per barrel, which may be necessary to curb non-OPEC+ growth.
Rystad Energy forecasts that 2025 will be a tipping point, marking the shift from imbalance to balance within the normal range of +1.5 million to -1.5 million barrels per day.
The current projected imbalance for 2025 to 2033 averages +2.5 million barrels per day, which the firm considers unsustainable.
In the longer term, Rystad Energy expects non-OPEC+ supply to decline faster, allowing OPEC+ to maintain its stronghold and gain a larger market share.
The most significant declines in non-OPEC+ supply, including Brazil, are anticipated after the 2030s.
As the oil market navigates these complex dynamics, industry observers will be closely monitoring refinery closures in Europe and other non-OPEC+ crude buyers, as well as product market supply pressure, which could be key factors in restraining non-OPEC+ growth and shaping the future of global oil supply and demand.
