In a notable departure from the optimism expressed by the Organization of the Petroleum Exporting Countries (OPEC), the International Energy Agency (IEA) reported a slowdown in global oil demand growth, prompting a revision of its 2024 forecast. The IEA, representing industrialized nations, anticipates a peak in oil demand by 2030, aligning with the global shift towards cleaner energy. OPEC, on the other hand, remains steadfast in its projection of rising oil consumption over the next two decades.
Discrepancies between the two forecasters were underscored in their monthly reports, revealing starkly different estimates for 2024 oil demand. The IEA’s latest report, released on Thursday, foresees a growth of 1.22 million barrels per day (bpd) this year, a slight decrease from the previous month’s estimate. In contrast, OPEC adheres to a more optimistic forecast of 2.25 million bpd, as stated in its Tuesday report.
The IEA attributes the deceleration in 2024, representing half the growth anticipated in 2023, to a slowdown in Chinese consumption. Initial projections from the IEA had envisioned a demand growth of 1.24 million bpd for 2024. “The expansive post-pandemic growth phase in global oil demand has largely run its course,” stated the IEA, emphasizing the influence of a more challenging global macroeconomic climate likely to constrain growth in the current year.
Despite concerns about diminishing demand, oil prices have seen a 6% increase in the year to date. Factors such as attacks on shipping in the Red Sea, outages in major non-OPEC oil-producing countries like the United States, and OPEC+’s fresh supply cuts in the first quarter have contributed to supply fears.
The IEA’s report also addresses the supply side, revising its 2024 projection to a growth of 1.7 million bpd, up from the previous estimate of 1.5 million bpd. This upward adjustment is attributed to increased supply from producers outside the OPEC+ alliance. The IEA now anticipates a record-high supply of approximately 103.8 million bpd, primarily driven by countries outside OPEC+, including the United States, Brazil, and Guyana.
With a robust outlook for supply outside OPEC+, the IEA predicts a slight build in inventories in the first quarter. The agency suggests that OPEC+ may exceed requirements if the additional voluntary cuts are reversed in the second quarter. Notably, a new OPEC+ voluntary cut of 2.2 million bpd took effect in the first quarter.
In January, OPEC+ crude oil output from all 22 member countries decreased by 330,000 bpd to 41.52 million bpd, according to the IEA. The decrease was attributed to protests disrupting Libyan production and some members implementing deeper output cuts, though not as extensive as pledged. The IEA envisions demand for OPEC+ crude, including inventories, averaging 41.2 million bpd in the first quarter, slightly below January’s output, before rising to 41.5 million bpd in the second quarter.