Global oil refiners will suffer a “soft patch” next year as new capacity in Mexico, Africa and the Middle East boosts fuel supply, according to Vitol Group’s Head of Research Giovanni Serio.

However, given the global energy transition, it’s hard to build a strong case for more investment in the sector, Serio said at the Financial Times Commodities Asia Summit in Singapore. Refining supply-balances are set to tighten by 2030 unless there is another round of investments in the industry, he added.

A global push toward cleaner energy including electric vehicles is expected to sap gasoline and diesel demand, making it harder for fuel makers to justify expensive investments in new facilities. Sinopec recently said China’s gasoline demand will peak this year, although Serio said that hasn’t happened yet.

“The pace of the energy transition in oil and in transportation has fallen short of expectations, and at the same time, the lack of investment in the industry has not translated into a shortage of supply as expected,” said Serio.

Vitol expects net additions of gasoline-fueled cars in China to rise by 12 million units this year and by 11 million in 2024, Serio said. He added that demand for liquefied petroleum gas will keep growing due to requirements from the petrochemical sector, which produce a wide array of plastic products.

The pace of oil demand in most nations has returned to pre-pandemic levels, with the exception of the US, Serio said. Russian crude output remains high and production in the US, Brazil and Guyana is growing, he said.

There are some concerns about China’s construction sector but there are “green shoots of hope” for the nation’s oil demand, Mike Muller, Vitol’s head of Asia, said at the event. Gasoline and jet fuel consumption is still growing, although the use of coal has weighed on liquefied natural gas demand, he added.

Meanwhile, India is seeing large growth in commodity demand as its level of industrialization and urbanization gathers pace, said Muller.

--With assistance from Clara Ferreira Marques.

(Updates with comments from Vitol Asia Head Mike Muller from paragraph 7.)