PETALING JAYA: Peak oil demand could arrive as soon as 2030, driven by strong adoption of electric vehicles and the shift towards renewable energy as the preferred fuel source, according to the US Energy Information Administration (EIA) and International Energy Agency (IEA).
In a report, AmInvestment Bank Research (AmInvestment Research) said debate over peak oil demand is set to intensify following the release of January oil market reports by the two agencies.
“The documents record a stark divergence in views over the near-term outlook on the global oil and gas (O&G) landscape, premised on their respective thesis of peak oil demand which is expected to arrive as soon as 2030, according to EIA and IEA.
“This will be largely driven by strong adoption of electric vehicles and the shift towards renewables as the preferred fuel source,” AmInvestment Research said.
The research house said the Organisation of Petroleum Exporting Countries (Opec), however, opposes the view due to the short timeframe of six years to realisation and has brought forward its 2025 guidance to exhibit its confidence of even stronger demand expectations in its January oil market updates.
“Though we believe the debate is academic for now as there are still too many moving parts, this does carry a meaningful implication for the oil and gas industry.
“Peak-oil demand questions the rationale for increased investment, of which too little will lead to serious energy-security concerns.
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“In our observation, there has been no letdown in investments into the sector.
“Rather we find companies are becoming more disciplined with their capital allocation strategies,” said the research house.
Global demand for oil in 2023 maintained the strong momentum seen since early 2022 as global liquids consumption stayed largely above 100 million barrels per day (mbpd) levels on a quarterly basis throughout the year, it added.
This was largely attributable to the strong rise in demand from non-Organisation for Economic Cooperation and Development countries, which accounts for 88% of estimated consumption growth, particularly China, due to the economic recovery following its Covid-19 lockdowns.
“This brings the 2023 average to 101 mbpd. Despite the strong base, views on the direction of global oil demand in 2024 see a stark divergence with the EIA expecting consumption growth to slow down sharply by 1.4 mbpd versus the Opec’s forecast of a more flattish performance at 2.2 mbpd.”
The near-term demand growth differential, it added, was largely due to China, given its 43% contribution to total world liquids consumption growth in 2023, of which the EIA expects oil demand growth of 2% and Opec 2.6%.
“We believe there is an upside to these estimates, driven by the recovery in international air travel in China and stronger production activity by Chinese refiners,” the research house said
It also anticipates strong US production to continue in 2024 as the United States remains committed to its oil production to prevent the return of high inflation.
On the Red Sea crisis, AmInvestment Research said the impact remains muted for now, as companies are opting for alternative routes although it result in an extra two weeks of travel time.
“We maintain our Brent crude oil price forecast of US$85 per barrel for 2024. As a comparison, our forecast is broadly close to the EIA’s Short-Term Energy Outlook expectation of US$83 per barrel.
“Although Brent crude oil prices have seen a slight decline in January, we believe demand and supply dynamics still remain in favour of an elevated Brent crude price environment throughout the year,” AmInvestment Research said.