OPEC has lowered its global oil demand forecasts for the next four years. This change reflects slower economic growth in China and faster adoption of electric vehicles. However, OPEC raised its long-term outlook, expecting demand to grow steadily due to rising consumption in developing regions. The organisation insists there is no sign that oil demand has peaked.
Recent Demand Trends and Forecasts
OPEC’s 2025 World Oil Outlook projects world oil demand will average 105 million barrels per day (bpd) this year. Demand is expected to rise to 106.3 million bpd in 2026 and reach 111.6 million bpd by 2029. These medium-term forecasts are lower than last year’s estimates. For example, 2026 demand is now forecast 1.7 million bpd lower than previously predicted. Despite this, OPEC’s forecast extends the growth period longer than other agencies like BP and the International Energy Agency (IEA), which see demand peaking within this decade.
Factors Affecting Demand in China
China’s slower economic growth is a key reason for the reduced near-term demand outlook. The country has also seen faster electric vehicle (EV) adoption and expanded charging infrastructure. This shift reduces oil consumption, especially in transport. Additionally, oil substitution in industrial and other sectors contributes to slower demand growth. China’s impact is as it has been the main driver of global oil demand increases for decades.
OPEC+ Production and Market Strategy
OPEC+ began easing output cuts in April 2025, increasing production by 138,000 bpd initially, followed by monthly rises of 411,000 bpd through August. However, the group maintains separate cuts of 3.65 million bpd until the end of 2026. These cuts aim to support prices and manage supply. Discussions on further easing these cuts have not yet occurred. OPEC+ producers are focused on regaining market share after years of supply restrictions.
Long-Term Outlook and Regional Drivers
OPEC expects oil demand to reach 122.9 million bpd by 2050, up from 120.1 million bpd forecast last year. This contrasts sharply with forecasts from agencies like BP, which predict lower demand by mid-century. OPEC marks growth in India, the Middle East and Africa as key drivers of future demand. Factors such as slower EV adoption in Europe and the U.S. withdrawal from the UN climate pact may slow energy transitions in developing countries, sustaining oil consumption.
Investment Needs in the Oil Sector
To meet future demand, OPEC estimates the oil industry requires $18.2 trillion in investment by 2050. This is an increase from the $17.4 trillion estimated last year. The organisation stresses the importance of sustained investment to ensure supply security and market stability amid evolving global energy dynamics.
Questions for UPSC:
- Critically analyse the impact of electric vehicle adoption on global oil demand and the challenges it poses to oil-exporting countries.
- Explain the role of emerging economies like India and Africa in shaping future global energy demand and its implications for sustainable development.
- What are the factors influencing the energy transition in developing countries? How do geopolitical decisions such as the U.S. exit from the UN climate pact affect this process?
- Underline the significance of investment in the oil sector for global energy security. With suitable examples, discuss how investment trends influence market stability and economic growth.
