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Highlights
IEA projects oil demand to grow until decade-end, driven by US consumption trends
China’s oil use expected to peak earlier due to EVs and alternative transport
Production capacity forecast to rise amid global supply security concerns
Companies operating within the FTSE 100 and FTSE 350 indexes are closely watching evolving global oil trends. The International Energy Agency (IEA) has reaffirmed its outlook that oil demand will continue growing throughout the current decade, even as the world’s largest importer, China, nears its peak consumption.
The IEA’s analysis reveals that while China's oil demand is likely to plateau within a few years, continued use in the United States is expected to uphold global consumption. This divergence stems from contrasting domestic conditions. China’s advances in electric vehicle penetration, natural gas freight transport, and extensive high-speed rail networks have gradually displaced traditional fuel demand.
Meanwhile, the United States—still the world’s largest oil consumer—is seeing a slower shift away from internal combustion engines. Lower pump prices and policy changes have also contributed to dampening momentum toward alternative transport modes. This slowdown has led to an upward revision in the IEA’s demand outlook for the US market.
China’s Demand Leveling Linked to Structural Changes
According to the IEA, China's overall oil consumption is showing signs of stabilization due to a combination of economic challenges and structural transitions. Deployment of electric vehicles and rail systems has resulted in diminishing growth rates for fuel products. The agency indicates that China’s demand for transport fuels may have already peaked earlier in the decade.
For energy producers listed on the FTSE AIM 100 Index, particularly those with exposure to Asian markets, this trend marks a strategic pivot. Companies may shift focus to regions where oil usage is projected to remain resilient.
US Consumption and Policy Developments Influence Forecasts
The revised demand projection for the United States stems from evolving policy directions and slower-than-anticipated EV adoption. Administrative measures, including challenges to zero-emission vehicle mandates in states like California, have reinforced ongoing reliance on gasoline-powered transport.
This outlook supports expectations of robust oil usage in the near term. Energy companies listed on FTSE AIM UK 50 INDEX may benefit from this trend, particularly those focused on upstream and midstream operations within North America.
Production Capacity Rises Alongside Supply Uncertainty
While demand maintains upward pressure, the IEA notes that global production capacity is also increasing. This could create a well-supplied market through the remainder of the decade, provided there are no significant disruptions. However, geopolitical tensions in the Middle East—highlighted by recent escalations involving Israel and Iran—continue to pose supply challenges.
Despite elevated risk, energy firms across the FTSE and other indices remain positioned to navigate the shifting landscape. As the energy transition progresses unevenly across key global markets, diversified oil and gas players may need to balance supply security with evolving demand patterns.
