The OPEC-plus group of oil producers has decided to pause joint output hikes in January, February and March in response to new US sanctions on Russian oil producers Rosneft and Lukoil.
The International Energy Agency stated in its annual World Energy Outlook that under its current policies scenario oil demand will reach 113 million barrels per day by mid-century, about 13% higher than 2024 consumption.
The IEA also said global oil and gas demand could grow until 2050, marking a shift from earlier expectations of a rapid transition to cleaner fuels and indicating that climate goals are likely to be missed.
Essentially, the IEA has backpedalled on its previous unequivocal view that fossil fuel demand will peak by 2030.
What is clear is that energy transition is not dead, but it is progressing slower than originally envisaged. What is ‘dead’ are dystopian climate scenarios forecasting rapid decline in fossil fuel consumption.
According to the IEA, global energy security faces an unprecedented range of risks and uncertainties across multiple fuels and technologies.
Analysis by energy and resources consultancy firm Woodmac shows that oil demand will continue to rise over the next decade, driven by energy-intensive technologies like artificial intelligence (AI), as well as transport and petrochemicals. The result: a tighter window for achieving global climate goals and a more complex path to net-zero.
Production needs to increase
Another climb-down by the IEA is that it now recognises that investment in new oil and gas production needs to increase in order to ‘stand still,’ due to the high rate of natural depletion from existing oil and gas output.
ExxonMobil predicts that without continued investment in new fields, the global oil and gas production decline rate could reach up to 15% annually, due to a higher proportion of these coming from “unconventional” sources.
Even though talk of an oil glut persists, at least in the US, oil inventories sit at multi-year lows and prices are holding.
In addition, while inventories have been increasing worldwide, a buildup of strategic oil reserves in China has absorbed some of the extra supply.
Another factor is that stricter US sanctions on Rosneft and Lukoil kick in on November 21, expected to disrupt Russian oil export flows.
Goldman Sachs expects the impact to be “likely more limited to global oil imports because OPEC has spare capacity to offset some of the shortfall”.
China, India seek suppliers
Regardless of how long the sanctions would last, global trade flows have started to shift again as Russia’s key buyers, China and India, rush to replace sanctioned barrels with alternative supply, or at least to purchase Russian oil through non-sanctioned entities.
Oil inventories around the world are expected to grow through 2026 as production increases faster than demand for petroleum fuels, adding to pressure on oil prices.
This forced the expanded OPEC+ group to pause its planned output increases for Q1 2026, signaling an effort to prevent a price slump, allowing it to assess the impact of the US sanctions on the world oil supply.
OPEC’s revision, in its monthly report, of supply-demand balance in 2026 confirms the group is now acknowledging the possibility of a supply glut in 2026.
But estimates vary on how big the overhang will be, ranging from the IEA’s super-glut of record proportions, to OPEC’s more modest inventory increases in the historically weaker demand period in the first quarter of any year.
Also, if Ukraine continues to press its deep-strike campaign and Russia faces rolling or compounding infrastructure losses, the supply risk to global oil markets could rise.
With oil demand growth slowing due to EV sales and stagnating oil consumption in China, the World Bank expects Brent prices to fall from an average of $68 a barrel this year to an average of $60 next year, which would be a five-year low.
Finally, in an indication of what oil majors are thinking, Chevron’s Five-Year Plan to 2030 prioritises “superior shareholder returns.” Chevron plans to focus on higher profits and returns to shareholders, instead of growing oil and gas production.
Dr Charles Ellinas, Councilor, Atlantic Council
