Oil supply growth outpaces demand as fossil fuel phaseout could fall short ahead of COP30

With intensifying geopolitical strains and heightened uncertainty about global economic prospects, oil markets are undergoing structural changes as the key drivers of supply and demand growth of the past 15 years start to fade, according to the latest edition of the IEA’s medium-term outlook.

The report highlights several important trends that could considerably reshape global oil markets over the medium term. It notes that China – which has driven growth in global oil demand for well over a decade – is set to see its consumption peak in 2027, following a surge in electric vehicle (EV) sales and the continued deployment of high-speed rail and trucks running on natural gas.  

At the same time, US oil supply is now expected to grow at a slower pace as companies scale back spending and focus on capital discipline – although the US remains the single largest contributor to non-OPEC supply growth in the coming years.

In this context, global oil demand is forecast to increase by 2.5mn b/d between 2024 and 2030, reaching a plateau of around 105.5mn b/d by the end of the decade. At the same time, global oil production capacity is forecast to rise by more than 5mn b/d to 114.7mn b/d by 2030. This growth is set to be dominated by robust gains in natural gas liquids (NGLs) and other non-crude liquids. The strategic shift towards higher non-crude capacity is driven by strong global demand for petrochemical feedstocks and the development of liquid rich gas resources.

The OPEC+ alliance has started to unwind production cuts, reshuffling oil supply trajectories. However, the report finds that increased output from the US, Canada, Brazil, Guyana and Argentina is set to be more than sufficient to cover the growth in global demand in the coming years. In the absence of major supply disruptions, the latest medium-term forecast sees a comfortably supplied oil market through 2030 – although significant uncertainties remain, especially given rising geopolitical risks and heightened trade tensions.

According to the report, accelerating sales of EVs – which reached a record 17 million in 2024 and are on course to surpass 20 million in 2025 – have kept a peak in global oil demand on the horizon. Based on the current outlook, EVs are set to displace a total of 5.4mn b/d of global oil demand by the end of the decade. The replacement of oil with natural gas and renewables for power generation in the Middle East, particularly in Saudi Arabia, is also expected to weigh on global oil demand growth in the coming years.

With the petrochemical industry now poised to become the dominant source of oil demand growth from 2026 onwards, the report finds the industry is on track to consume one in every six barrels of oil by 2030. Demand for oil from combustible fossil fuels – which excludes petrochemical feedstocks and biofuels – may now peak as early as 2027 even as the consumption of jet fuel continues to grow, it suggests.

Since petrochemicals are mostly produced from non-refined products such as NGLs, these trends are set to increasingly impact the refining sector. The report sees net refinery capacity far exceeding demand for refined products in 2030, which is likely to result in more capacity shutting down in the interim.

Tracking the transition: a mid-year review of fossil fuel phaseout  

Meanwhile, new analysis by E3G and Zero Carbon Analytics shows that while 10 countries are signalling a shift away from fossil fuels in their updated national climate plans, known as NDCs, the overall pace and scale of action remain too limited to meet global climate goals.

Of the 10 countries that have reaffirmed or strengthened their commitments to reduce reliance on fossil fuels, seven explicitly mention plans to phase out or remove fossil fuel subsidies in specific sectors. However, only three nations – Canada, Singapore and the Marshall Islands –have committed to fully eliminating fossil fuel subsidies, the analysis finds.

Among industrialised economies, the UK is the sole country to have submitted an NDC aligned with the 1.5°C climate target. Several developing countries, such as Kenya, have also submitted 1.5°C-compatible NDCs, although these are conditional on receiving international support, highlighting their limited contributions to global emissions. In addition, countries like Nepal, the Maldives and Moldova have made clear links between phasing out fossil fuels and achieving economic, health and energy security benefits, underlining the broader advantages of a clean energy transition.

‘More countries are starting to see fossil fuel phaseout not only as a climate imperative, but as a pathway to cleaner air, lower costs and greater energy security,’ said Dido Gompertz, Policy Advisor in E3G’s Global Clean Power Diplomacy team. ‘That shift is real – but without serious near-term action from major emitters like China, the EU and India, we won’t get far enough, fast enough. These plans are more than pledges – they’re signals of intent. And right now, the world’s biggest players are too quiet.’

Several new NDCs illustrate what the transition can look like in practice, according to the analysis. The UK phased out coal in 2024 and is consulting on not issuing new licences for oil and gas exploration. The Marshall Islands links fossil fuel phase-out to better air quality, new employment opportunities for women and improved energy security. Moldova highlights reduced exposure to volatile international energy prices and lower public health costs. Kenya and Brazil point to the need for international support to make the transition fair and equitable, especially in developing economies with unmet energy demand.

At the same time, progress remains uneven. New Zealand and the US have reversed bans on fossil fuel exploration. Fourteen countries mention fossil fuel subsidy reform in some form, but only Canada has adopted a binding framework for phaseout. Few countries explicitly commit to full divestment from fossil fuel assets. And despite growing calls for reform, no country has introduced a nationwide moratorium on fossil fuel exploration.

‘What we’re seeing is a gap between political signalling and policy delivery,’ said Victoria Kalyvas, Research Associate at Zero Carbon Analytics. ‘Countries are increasingly acknowledging the need for a fossil fuel phaseout in their climate plans – but few are backing that up with timelines or structural reforms.’

To limit warming to 1.5°C, emissions must peak by 2025 and fall 43% by 2030, but existing fossil fuel infrastructure alone could overshoot the carbon budget unless mitigated, the analysis finds. The IEA and IPCC agree: no new fossil fuel projects are needed, and 95% of energy investment should shift to clean energy by 2035 to avoid a costly and unjust transition. As COP30 approaches, major emitters like the EU, China and India must lead on phasing out fossil fuels, while countries like Indonesia and South Africa can show how climate goals and development can go hand in hand.