The oil market is at risk of a supply shortage as peak demand is still 10 years away, Goldman Sachs says

• The oil market could see a supply crunch, Goldman Sachs said.
• Oil demand will rise for another 10 years, though producers are pulling back on new investment.

The global oil market could run into a supply shortage as peak demand is still a decade away, according to Goldman Sachs analysts.

The investment bank estimated the world's oil demand would continue to rise for at least the next 10 years, with crude demand peaking at around 110 million barrels a day in 2034. That's due to rising oil demand in Asia and increasing demand for petroleum products, the analysts said.

Rising demand could spark a supply shortage, especially if companies continue to dial back on capital expenditures, the bank added. Spending by six major oil producers, including ExxonMobil and Chevron, could fall as much as $3.8 billion this year, according to a survey conducted by Oil & Gas Journal.

"We think peak demand is another decade away, and more importantly, after the decade it takes to peak, it plateaus, rather than sharply declines, for another few years," Nikhil Bhandari, a managing director at Goldman, and Amber Cai, an analyst at the bank, said in a recent report. "While peak oil demand is still a decade away, capital is slowing for the production of crude oil and oil products, contributing to constrained supply in the medium term," they later added.

Oil prices slumped at the end of 2023, in part due to booming crude production in the US and other countries. But US production is set to see a slowdown, with the US Energy Information Agency forecasting domestic crude production to grow by just 2% from levels in 2023.

Other oil producers are continuing to pull back on production, too. OPEC+, the oil cartel led by Saudi Arabia, has decided to extend its 2.2 million barrel-a-day supply cut into 2025, according to a release from its last meeting.

Oil prices have climbed higher over the past month as markets weigh the supply and demand outlook. Brent crude has surged 8% from its low in early June, trading around $84.51 a barrel on Monday.