The Organization of the Petroleum Exporting Countries (OPEC) and the International Energy Agency (IEA) have presented vastly different forecasts regarding global oil demand. While OPEC anticipates strong growth in the near and distant future, the IEA paints a more subdued picture, signaling a significant disparity in outlooks between the two influential organizations.
OPEC forecasts that global oil demand will grow by over 2 million barrels per day (bpd) in 2024, although it has slightly revised this figure downward in recent months. On the other hand, the IEA projects demand growth to be under 1 million bpd, a striking difference of 1.1 million bpd between the two forecasts. With only three months remaining in 2024, this gap highlights a widening divide between the two groups.
A Broader Disparity
The differences in projections between OPEC and the IEA extend beyond the short term. Both organizations now offer contrasting views on medium- and long-term oil demand, as well as on how the world should navigate the energy transition.
Initially, OPEC appeared overly optimistic about 2024, particularly in its reliance on China to drive demand growth. In July 2023, OPEC’s forecast anticipated a more than 2 million bpd increase. However, a year later, in August 2024, OPEC revised this estimate downward for the first time, as China’s economic performance fell short of expectations.
In contrast, the IEA’s forecasts have consistently been more conservative. The agency has steadily lowered its projections throughout 2024, with its latest estimate showing just a 900,000 bpd growth in global oil demand, citing a sharp decline in Chinese consumption. According to the IEA, global oil demand in the first half of 2024 grew at a sluggish pace of 800,000 bpd compared to the previous year—the slowest growth rate since 2020.
Slowing Chinese Demand
The primary factor behind this slow growth has been a “rapidly slowing” Chinese economy. In July 2024, China’s oil consumption contracted for the fourth consecutive month, falling by 280,000 bpd, according to the IEA. The agency now expects China’s oil demand to grow by only 180,000 bpd in 2024, a stark contrast to the rapid growth the country experienced in previous years.
“Chinese oil demand is currently in contraction, falling 1.7%, or 280,000 bpd, year-on-year in July,” the IEA reported. “We expect annual growth of only 1.1%, or 180,000 bpd, in 2024.”
For much of the 21st century, China has been the driving force behind global oil demand growth. Over the past decade, Chinese demand has increased by over 600,000 bpd annually, accounting for more than 60% of global growth. The IEA’s projection of a mere 180,000 bpd increase in 2024 is a fraction of the growth rates seen in previous years.
OPEC’s More Optimistic View
In contrast, OPEC continues to hold a more optimistic outlook for China’s oil demand growth, forecasting a 653,000 bpd increase in 2024, though it has revised this figure down from 700,000 bpd. Despite acknowledging challenges in China’s real estate sector and the rise of electric vehicles and liquefied natural gas (LNG) trucks, OPEC remains confident in its forecast of robust demand growth.
Globally, OPEC now expects oil demand to increase by 2.03 million bpd in 2024, down slightly from its previous estimate of 2.11 million bpd. While still bullish, many analysts argue that this projection is overly optimistic, with most estimates ranging between 1 million bpd and 1.5 million bpd, much closer to the IEA’s figures.
Such a wide discrepancy between OPEC and the IEA is rare. Historically, the two organizations’ forecasts have not differed by more than 350,000 bpd by September of any year since 2010, according to The Wall Street Journal.
Long-Term Oil Demand
Beyond short-term projections, OPEC and the IEA also hold contrasting views on long-term oil demand. The IEA has consistently predicted that global oil demand will peak by 2030. “With Chinese demand slowing and only modest growth or declines in other regions, we expect global oil demand to plateau by the end of this decade,” the IEA said in its September 2024 report.
China’s oil demand slowdown is driven by its economic performance and a shift towards electric vehicles and LNG-fueled trucks. Gasoline demand in China is expected to peak either this year or in 2025, as new energy vehicles accounted for more than half of the country’s passenger vehicle sales in July 2024.
While OPEC recognizes that road fuel demand in China is undergoing structural changes, the cartel remains more optimistic about future global oil consumption. In its 2024 World Oil Outlook (WOO), OPEC predicted that global oil demand could exceed 120 million bpd by 2050. “There is no peak oil demand on the horizon,” OPEC stated, countering the IEA’s forecast.
The cartel has frequently criticized the IEA’s projections, calling its forecasts of peak oil demand by 2030 “dangerous” and “anti-oil.”
Conclusion
The divide between OPEC and the IEA underscores differing perspectives on the future of global oil demand. As the world grapples with an energy transition and fluctuating economic conditions, these contrasting outlooks will likely continue to shape global oil markets and energy policies for years to come.
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