The rate of oil demand growth has peaked 'for good,' Bank of America says

• Bank of America forecasts the growth rate for oil demand to slow in the coming years.
• Energy technology is becoming more efficient, which will temper total oil usage.

Oil demand will still increase in the coming years, but thanks to things like improving technology and the switch to alternative fuel sources, the rate of growth has likely peaked, Bank of America said in a note this week.

Analysts led by commodity strategist Francisco Blanch forecasted that global oil demand should increase at a slower pace leading up to 2030 following the sharp rebound from pandemic lows.

Growth should continue more prominently in industries that are difficult to decarbonize, such as airlines, chemical companies, and marine transportation, in the firm's view. However, developments among the 38 OECD nations including increased efficiencies, aging populations, and softer income growth should help counteract that.

In the third quarter of 2023, global oil demand hit a record of about 103 million barrels a day, up from the severe contraction seen in 2020 of 92 million barrels a day.

For the next six years, BofA expects a net growth of roughly 3.7 million barrels a day.

"[A]t 600k b/d YoY on average, oil demand growth into the end of the decade should be a fraction of the rate observed in the past three years," Blanch and his team wrote.

Bank of America forecasts oil consumption in China to peak near 2030 amid its electric-vehicle boom. The firm also said India will remain the fastest-growing major petroleum market.

The backdrop of slowing global economic growth will also factor into the weakening growth rate for oil demand.

Developed economies including the US and some European and Asian nations are poised to lead the way with substitutions, as well as demographic challenges to continued growth in oil demand.

"At any rate, the final destination towards net zero emissions does not change, as renewable energy prices drop to become competitive with thermal fuel alternatives," Blanch said.

"Following a 2.3mn b/d or 2.3% expansion in 2023, oil consumption will likely continue to grow into 2030, but the rate of oil demand growth has likely peaked for good."