(Bloomberg) — Global oil markets face a surplus of more than 1 million barrels a day next year as Chinese demand continues to falter, cushioning prices against turmoil in the Middle East and beyond, the International Energy Agency said.

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Oil consumption in China — the powerhouse of world markets for the past two decades — has contracted for six straight months through September and will grow this year at just 10% of the rate seen in 2023, the IEA said in a monthly report on Thursday. The global glut would be even bigger if OPEC+ decides to press on with plans to revive halted production when it gathers next month, according to the agency.

It’s possible that China’s oil demand has peaked, IEA Head of Oil Industry and Markets Toril Bosoni said in an interview with Bloomberg TV on Thursday.

“It’s not just the economy and the shift, the slowdown in the construction sector,” Bosoni said. “It’s the transition to electric vehicles, high speed rail and gas in trucking that is undermining Chinese oil demand growth.”

Amid this extended weakness in Chinese demand, crude prices have retreated 11% since early October despite ongoing hostilities between Israel and Iran, as traders focus growing output in the Americas, the Paris-based IEA said. The decline foreshadows a “well-supplied market in 2025,” it added. Brent futures traded near $72 a barrel on Thursday.

Global oil consumption will increase by 920,000 barrels a day this year — less than half the rate seen in 2023 — to average 102.8 million per day, it said. Next year, demand will grow by 990,000 barrels a day.

“The sub-1 million barrel-a-day growth pace for both years reflects below-par global economic conditions with the post-pandemic release of pent-up demand now complete,” according to the report. “Rapid deployment of clean energy technologies is also increasingly displacing oil in transport and power generation.”

The agency, which advises major economies, predicted earlier this year that world demand will stop growing this decade amid a shift away from fossil fuels toward electric vehicles and renewable energy.

While demand growth cools, supplies from producers such as the US, Brazil, Canada and Guyana is set to grow this year and next by 1.5 million barrels a day, the agency predicts. As a result, world supplies will exceed demand next year by more than 1 million barrels a day, even if the 23-nation OPEC+ cartel abandons plans to restore output.

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