IEA Report Highlights Tailwinds for U.S. Midstream

Summary

The IEA’s 2025 World Energy Outlook projects more resilient global crude oil demand than previously modeled, reinforcing the long-term call on U.S. production and supporting sustained volumes for midstream infrastructure.
The “Age of Electricity” is revitalizing domestic natural gas demand, which creates opportunities for midstream companies.
The US remains well positioned to meet rising demand from developing economies for liquefied natural gas and petrochemical feedstocks.

Earlier this month, the International Energy Agency (IEA) published its annual World Energy Outlook, a report that explores a range of scenarios for the global energy landscape. This year’s analysis marked a significant change from prior years, with the theme centering on energy security rather than climate and the shift to cleaner fuel sources. Learn how key takeaways around oil demand, natural gas and rising global energy exports have positive read-through for U.S. midstream.

The CPS Returns in This Year’s WEO

This year’s report has three main scenarios, with the IEA reintroducing its Current Policies Scenario (CPS) after a five-year absence. The CPS offers a cautious perspective on the energy system by strictly modeling outcomes based on current policies and regulations. The Stated Policies Scenario (STEPS) considers a broader range of policies that have been formally put forward or announced alongside existing strategy documents. The final pathway is the Net Zero Emissions by 2050 Scenario (NZE), which reflects the specific steps required to achieve net zero emissions by 2050.

A Revised Outlook for Durable Global Crude Oil Demand

The 2025 Outlook marks a significant change from prior year reports that had modeled peak fossil fuel demand by 2030. The scenarios offer more robust assessments of demand growth for crude oil and natural gas, while acknowledging that renewable power alone will not be enough to support global energy needs for the foreseeable future. In the CPS model, global demand for oil rises ~13% to 2050, driven by increased use for road transport, petrochemical feedstocks, and aviation in emerging and developing economies. Oil remains the dominant fuel to 2050 in the CPS, and India overtakes China to become the main driver of oil demand growth.

In the STEPS model, global oil demand would peak “around 2030” compared with “before 2030” in the 2024 STEPS model. Global oil demand out to 2050 is also higher in this year’s STEPS model, as can be seen in the below chart. For context, global oil demand was 103 million barrels per day (MMBpd) in 2024.

In both scenarios, the U.S. remains the world’s largest oil producer to 2050. Importantly, the scenarios this year signal the durability of crude oil demand, pushing back on the idea that peak oil consumption is imminent. Even in the STEPS model, which anticipates a peak around 2030, the subsequent decline is modeled to be much shallower than previously expected.

For the U.S. midstream sector, this combination of dominant U.S. production and resilient global consumption is constructive. It suggests that the call on U.S. infrastructure will endure, keeping volumes for oil pipelines and marine terminals high and supporting sustained free cash flow. Notably, this implies a solid outlook for midstream even without the tailwind of natural gas demand, which is modeled to grow rapidly over the next decade.

The Expanding Role of Domestic Natural Gas in the “Age of Electricity”

The IEA’s 2025 report highlights the resurgence of domestic power demand, with U.S. natural gas demand in the STEPS model higher than in 2024’s report. In the CPS model, U.S. natural gas demand grows by 8.5% or 7.7 billion cubic feet per day (Bcf/d) through 2035, driven by a 4.8 Bcf/d increase related to power generation. In the STEPS model, U.S. natural gas demand peaks around 2030 and returns to 2024 levels by 2035. The IEA notes that upward revisions in natural gas demand are driven by higher expectations for data center demand (read more) and regulatory shifts, keeping natural gas central to the energy mix well into the 2030s.

This trend is underpinned by what the IEA terms the “Age of Electricity,” where U.S. demand is projected to rise sharply due to the rapid proliferation of data centers supporting artificial intelligence (AI). To meet the 24/7 reliability required by hyperscalers, utilities are requiring new pipeline capacity to fuel gas-fired power plants that backstop renewables. At the same time, tech companies are increasingly bypassing the grid via Behind-the-Meter (BTM) arrangements, where power generation is co-located on site.

Within midstream, Williams (WMB) has three BTM projects underway through its Power Innovation business, while also pursuing pipeline expansions. MPLX (MPLX) recently signed a letter of intent with MARA Holdings (MARA) to supply gas for up to 1.5 GW of on-site generation in the Permian. Other midstream names are building or expanding pipelines to help meet growing natural gas demand for power generation, including Energy Transfer (ET), Kinder Morgan (KMI), and DT Midstream (DTM) to name a few.

U.S. Continues to Dominate LNG Exports

Rising global demand for U.S. LNG is driving growth opportunities for midstream. Based on projects under construction, global LNG export capacity is set to increase by ~54% to 83.2 Bcf/d by 2030. The U.S. is central to this expansion, accounting for roughly half of global growth and doubling its own export capacity by 2031 as shown below (read more). Midstream is investing in new feed-gas pipelines to transport volumes from the Haynesville and Permian basins to Gulf Coast export terminals.

In the CPS model, global demand keeps pace with the rapid capacity buildout. Natural gas demand from developing economies, the primary driver of LNG export growth, increases by 67.2 Bcf/d through 2035 and 129.0 Bcf/d by 2050. In this scenario, new capacity is fully utilized, primarily driven by Asian export growth.

In the STEPS model, slower demand growth creates a temporary surplus. Natural gas demand from developing economies grows by 52.8 Bcf/d to 2035 and 74.4 Bcf/d to 2050. The resulting global LNG surplus of 6.3 Bcf/d in 2030 is gradually worked off by 2035.

Petrochemicals Largest Driver of Future Oil Demand

Alongside natural gas, developing markets are also expected to drive export growth in natural gas liquids (NGLs). Recovered from natural gas streams, these hydrocarbons meet distinct international needs. Ethane acts as a primary feedstock ethylene, the critical building block for plastics and industrial products. Demand is anchored by Asian manufacturing growth, with overseas petrochemical crackers relying primarily on U.S. ethane. Liquefied Petroleum Gas (LPG) is composed of propane and butane and serves as a vital residential fuel for cooking and heating across developing economies.

In its 2025 report, the IEA revised its NGL outlook upward and identified petrochemicals as the primary driver of future oil demand growth.

The U.S. is positioned as the dominant global supplier in LPG exports, accounting for about half of the overall market. To support these volumes, major midstream players including Enterprise Products Partners (EPD), ET, and Targa Resources (TRGP) are heavily investing in NGL infrastructure, advancing multiple projects to expand fractionation capacity and export terminals (read more). Growing demand for U.S. energy creates a sustained volume tailwind for midstream.

The midstream companies mentioned above are included in the Alerian Energy Infrastructure index suite. The suite includes a number of indexes that are tracked by investable products, providing investors with a pathway to invest in U.S. energy leadership.

Looking for midstream insights in your inbox? Subscribe here to keep a pulse on midstream investing through our weekly updates.