The progress of many economies on their energy transition agendas will weaken demand growth for oil commodities in the years ahead, according to Paris-based global think tank International Energy Agency.

But while oil consumption will be on decline, there are projections that oil production on international scale will escalate, hence, that will be “easing market strains” and spare capacity could reach unprecedented levels.

“Growth in the world’s demand for oil is expected to slow in the coming years as energy transitions advance,” the IEA stressed.

In the near term, the agency is projecting that oil demand in key markets, primarily in Asia would still be tracking uptrend, but that will eventually diminish with the incursion of technological innovations on the cleaner energy sphere.

The major factors being integrated into the equation include those of electric vehicles, fuel efficiency improvements as well as product shift in energy generation that will be embraced even by the oil-producing countries in the Middle East.

The IEA emphasized that “based on today’s policies and market trends, strong demand from fast-growing economies in Asia, as well as from the aviation and petrochemical sectors, (will) drive oil use higher in the coming years.”

Following that boom, however, the think tank noted “those gains will increasingly be offset by factors such as rising electric cars, fuel efficiency improvements in conventional vehicles, declining use of oil for electricity generation in the Middle East and structural economic shifts.”

Between now and 2030, the IEA also forecasts that “a surge in global oil production capacity will outstrip demand growth,” hence, resulting in unusually high level of spare capacity.

The foreseen market dynamics of usage slowdown while there is capacity ramp up is perceived to be affecting markets in the near term, including the producer-member countries under the Organization of the Petroleum Exporting Countries (OPEC) and even the shale industry of the United States – but the likely impact will be more favorable prices for consumers.

Based on the calculation of the IEA, global oil demand is anticipated to increase by less than 1.0 million barrels per day this year; and it will be the non-OPEC countries that will be leading the charge on the production hike terrain.

While the world contemplates on strategic decline of oil and other fossil fossils usage in energy systems, high-level dialogues are increasingly focused on beefing up clean energy financing that shall be funneled into energy transition-related projects across many economies.

The targets being laid down, leading to the 29th Conference of the Parties (COP) in Baku, Azerbaijan, is to “scale up clean energy investment, especially in emerging and developing economies.”