The challenge of oversupply: the unprecedented scenario of the oil market towards 2030

The world is facing an unprecedented scenario in the oil market, with the International Energy Agency (IEA) projecting an oversupply of crude oil for the year 2030 that only finds parallels in the period of lockdowns due to the COVID-19 pandemic in 2020. This new reality poses an unprecedented challenge for countries and companies that depend heavily on this raw material, with an estimated excess production of eight million barrels per day more than what will be consumed. According to the IEA's projections, global oil demand will reach 105.4 million barrels per day by the end of the decade, with a moderate increase compared to previous years. Meanwhile, production is expected to grow to 113.8 million barrels per day, driven mainly by countries outside of OPEC such as the United States and other American producers. The resulting imbalance between supply and demand is described by experts as "astonishing," surpassing any surplus seen since the most critical times of the pandemic. This situation poses challenges for both oil markets within and outside of OPEC, as well as for the fracking industry in the United States. A paradigm shift is looming in a sector that has experienced years of great prosperity but now faces a new era of adjustments and transformations. IEA Executive Director Fatih Birol warns that the energy transition, changes in China's economic structure, and other factors will contribute to slowing down oil consumption, reaching its peak in 2030. This underscores the need for oil companies and producing countries to prepare to adapt to these imminent changes. OPEC's voluntary cuts may prove insufficient to balance the market in this new scenario of oversupply. A significant drop in demand is expected in developed countries, with a decrease of around three million barrels per day by 2030. This shift in oil consumption will mark a significant milestone, comparable to levels from decades ago. The market's center of gravity shifts towards the East, with an increase in transit between the Middle East and Asia, while Russian production will focus on China and India due to sanctions. Tensions in the refining sector will also undergo transformations, with projected growth in crude processing capacity that will be sufficient to meet all demand, thanks to factors such as transport electrification and biofuel production. A slower pace of refining is expected in Asia and the closure of refineries towards the end of the decade, reflecting a new dynamic in the global oil industry. In summary, the outlook for the oil market in the coming years is marked by an unprecedented oversupply, challenges for the industry, and the need to adapt to a constantly evolving scenario. The transition to more sustainable energy sources and the transformation of global oil demand present challenges and opportunities for all stakeholders in this crucial sector for the global economy.