Standard Chartered Foresees Long-Term Increase in Oil Demand Despite Recent Market Volatility

The global oil market is currently facing a complex blend of short-term volatility and long-term optimism, according to recent analyses and forecasts from oil agencies and banks, including Standard Chartered. The bank projects that global oil demand will reach new heights, hitting 110.2 million barrels per day (mb/d) by 2030 and further increasing to 113.5 mb/d by 2035. This forecast contrasts sharply with the recent dip in oil prices, influenced by a report from the Energy Information Administration (EIA) that revealed unexpected increases in U.S. crude and product inventories.

Despite the drop in oil prices over the last few weeks, influenced by the EIA’s data showing a week-over-week rise in crude inventories by 5.84 million barrels and oil product inventories by 6.57 million barrels, the long-term outlook remains bullish. These inventory builds, though modest relative to the five-year average, have raised concerns about current demand but have not dampened the overall growth expectations set by major agencies.

The International Energy Agency (IEA), in its latest monthly Oil Market Report (OMR), forecasts that global oil demand in 2025 will be 1.147 mb/d higher than in 2024, surpassing its earlier June 2023 estimate. Other leading organizations like the EIA and OPEC have predicted even higher demand growth for the same period, with the EIA forecasting a 1.351 mb/d increase and OPEC expecting a 1.847 mb/d rise.

What sets the IEA apart is its projection that global oil demand could peak before 2030, even under its most optimistic high-growth scenario. This potential peak, according to the IEA, would not lead to a sudden drop in fossil fuel consumption but rather to a prolonged period of fluctuation. In contrast, the EIA and OPEC anticipate demand peaks much later, around 2045 to 2050, indicating different views on when the oil market will begin to contract.

These varying predictions have created a substantial amount of investment uncertainty. Standard Chartered suggests that this forecast disparity could push long-term oil prices higher as the market grapples with conflicting outlooks. Despite predictions of cyclical downturns over the next decade, the bank maintains that a structural long-term peak in oil demand is very unlikely within this period.

The energy sector’s performance further illustrates market dynamics, with a 15.8% return year-to-date, making it the second highest among U.S. market sectors. Recent fluctuations, however, saw nearly a 5% decline over the past week, prompted by experts warning that geopolitical tensions, particularly in the Middle East, could lead to more pronounced price swings.

This ongoing interest in the energy sector, coupled with the robust long-term demand forecast, paints a complex but potentially promising picture for the oil market. As geopolitical tensions continue to influence global markets, the energy sector remains a critical area for investors to watch closely.