The world is likely to have a “major surplus” of oil by 2030 as production is ramped up while the clean energy transition tempers demand, the International Energy Agency (IEA) said in an annual report published on Wednesday.

Global demand is expected to “level off” at 106 million barrels per day (bpd) toward the end of this decade while overall supply capacity could reach 114 million bpd — resulting in a “staggering” surplus of eight million bpd that oil markets should prepare for, the IEA said.

The forecast comes days after the OPEC+ group of major crude producers signalled they would start to unwind output cuts this autumn, implemented in a bid to support prices against fears of weakening worldwide demand.

In its report, the IEA noted that fast-developing Asian countries like China along with the aviation and petrochemical sectors would still drive oil demand, which stood at 102 million bpd in 2023.

But the shift toward electric cars along with fuel efficiency gains for conventional vehicles, and declining use of oil by Middle Eastern countries for electricity production, would help limit the overall demand increase to around two percent by 2030.

At the same time, oil production capacity appears set to surge, led by the United States and other countries in the Americas, leading to the forecast of an eight-million-barrel surplus — a level reached only during the Covid-19 lockdowns of 2020.

“Spare capacity at such levels could have significant consequences for oil markets — including for producer economies in OPEC and beyond, as well as for the US shale industry,” the IEA said.

“As the pandemic rebound loses steam, clean energy transitions advance, and the structure of China’s economy shifts, growth in global oil demand is slowing down and set to reach its peak by 2030,” the agency’s executive director Fatih Birol said in a statement.

“Oil companies may want to make sure their business strategies and plans are prepared for the changes taking place,” he said.