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India to Lead Global Oil Demand Growth Until 2035: IEA Report

Prime Highlights: 

China’s oil consumption is declining as the country shifts towards electric vehicle adoption and increased use of renewable energy. However, the demand for petrochemicals is expected to partially offset this reduction in oil consumption. 

India will be the source of growing oil demand through 2035 and account for around 2 mb/d. 

Key Facts: 

India’s Leading Role: India is set to be the largest driver for growth in oil demand until 2035 and is expected to contribute almost 2 million barrels per day (mb/d) towards the increase in demand. 

Growth Shifts: India is going to surpass China as the leading driver of oil demand globally, as per the report from the International Energy Agency, as China’s oil consumption is going to decline. 

Global Oil Demand: Overall growth in global oil demand is expected to slow down, especially under the STEPS. 

Geopolitical Risks: The Middle East is still a hotspot, and specifically, the Strait of Hormuz passes through the region that accommodates 20% of global oil and LNG supplies. 

Key Background:  

The latest report from the International Energy Agency identifies India as the largest contributor to global oil demand growth through 2035. The agency forecasts that India will account for approximately 2 million barrels per day (mb/d) of the overall increase in global oil demand, positioning the country as the primary growth driver for the oil market in the coming decades. 

This marks a marked shift in the world oil panorama as India surpasses China in complementing the rise in demand for oil. According to the IEA, India’s oil demand growth is driven by the country’s economic expansion, coupled with rising energy consumption fueled by urbanization, industrial sector growth, and increased vehicle ownership. The crude oil demand from India is forecasted to skyrocket and thus add nearly 2 million barrels per day by the year 2035. 

China’s oil consumption will decline, primarily due to the country’s shift towards electric-based sources of energy. The increasing adoption of electric vehicles in China will decrease oil demand, mainly in the road transport sector. This decrease will partially be offset by increased oil use in petrochemical production as China remains the world’s largest player in the global petrochemical industry. 

Even as global oil demand is expected to slow down in the IEA’s Stated Policies Scenario (STEPS), oil-producing countries will face problems caused by the potential for oversupply, with spare crude production capacity forecasted to rise to 8 mb/d by 2030. Geopolitical conflicts in the Middle East, which are expected to impact oil supply include the critical chokepoints of the Strait of Hormuz through which about 20% of global oil and LNG supplies pass. 

Despite these challenges, the IEA also asserts that lower growth in demand combined with radical changes in transport and in the LNG, sectors can help sustain long-term price stability. However, the growing energy requirement of India will continue to feature as an important trend for the global oil market in the next decade.