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Peak oil demand still a decade away, Goldman Sachs analysts say

Published 05/27/2024, 06:12 AM
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Investing.com -- The momentum behind the clean energy transition is now strong enough for global demand for oil to reach a high point before 2030, according to a report last October from the Paris-based International Energy Agency.

The IEA predicted that the share of oil, natural gas and coal in the global energy supply will slip to 73% of by the end of the current decade, down from its long-held level of around 80%.

"This is an important shift," the IEA noted.

However, analysts at Goldman Sachs say they are taking a "more bullish" view of the outlook for oil. They are now projected that oil demand will rise to 108.5 million barrels per day by 2030, up from its prior estimate of 106 mb/d.

Peak oil demand, they added, will occur by 2034 at a level of 110 mb/d "followed by a long plateau" until 2040.

Among oil products, gasoline demand is seen cresting in four years and middle distillates -- diesel and jet fuel -- in the "mid-2030s." Regionally, emerging markets in Asia are projected to drive the majority of global oil demand growth.

Partly undergirding this outlook has been a recent stagnation in electric vehicle sales, a trend that the Goldman Sachs analysts said raises the odds of a slow adoption of non-combustion engines. Under this scenario, oil demand could continue to increase towards around 113 mb/d by 2040.

"The EV market is facing a few headwinds - EV subsidies are being cut in a few European markets, and continued price competition has led to profit pressure for OEMs and slower pace of OEMs’ new EV investments," the Goldman analysts said in a note to clients.

Supplies, meanwhile, are expected to remain constrained in the medium term due in part to a slowdown in capital expenditures on the production of crude oil and related products.

Based on their analysis, Goldman Sachs forecast an "elevated" future Brent oil price range of $75 to $90 per barrel.

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