IEA Revises Oil Demand Growth Forecast Higher for Third Month in a Row

Paris-based International Energy Agency IEA in its latest monthly Oil Market Report Thursday revised higher it’s 2024 oil demand growth forecast seeing an improving outlook. This is three months in a row that the IEA has revised higher its oil demand growth forecast for this year. It should be noted that IEA’s projection is more conservative compared to the 2.25 mil bpd forecast made by OPEC this week. The agency said last month record US crude oil supply is squeezing Saudi Arabia out of prime markets. This is in line with the angst between the cartel members at the recent OPEC+ meeting and the failure to push oil prices significantly higher or see US production fall.

Global oil demand growth has been slowing sharply as economic activity weakens in key countries, the International Energy Agency said as it slashed estimates for this quarter.

The IEA continues to expect growth rates will decelerate dramatically next year. Soaring production from the US, Brazil and Guyana is offsetting production cuts by Saudi Arabia and its OPEC+ allies, it said. The Chinese reboot after Covid Zero has not gone as IEA and OPEC had hoped. Evidence of a slowdown in oil demand is mounting.

IEA January Highlights

  • 2024 world oil demand growth forecast raised by 180k bpd to 1.24 mil bpd
  • Strong growth from non-OPEC+ producers could lead to substantial surplus if OPEC+ cuts are unwound
  • Economic outlook has improved over the last few months amid dovish pivot in central bank policy
  • Q4 2023 slump in oil prices to act as additional tailwind
  • Barring significant disruptions to oil flows, market looks reasonably well supplied in 2024

Crude oil futures have fallen around 23% since late September as China’s economic outlook darkens while output grows from a number of exporters.

Fresh production cutbacks announced by OPEC+ on Nov. 30 look set to eliminate a glut previously anticipated in the first quarter, but they come at a cost for the OPEC cartel. OPEC+ will see its share of the global market fall to the lowest level since its formation seven years ago, the IEA said.

We are seeing unexpected consequences by keeping prices higher, north of $70/bbl EIA points out they are helping finance a “record-smashing” supply wave from the US, which is “squeezing Saudi Arabia and other core Middle Eastern producers out of prime export markets,” the report said.

US oil production exceeded 13 million barrels a day in the latest report, defying predictions.

“The continued rise in output and slowing demand growth will complicate efforts by key producers to defend their market share and maintain elevated oil prices,” the IEA said last report, nothing has changed there.

Within OPEC a significant supply rebound from Iran is also buffering curbs by other members. Europe, Russia and the Middle East drove the EIA’s downgrade of fourth-quarter demand estimates. Europe was “particularly soft amid the continent’s broad manufacturing and industrial slump,” the IEA said. Higher interest rates are also a headwind, the agency noted. Though it should be noted the Federal Reserve is looking a little more Dovish.

Global oil demand growth remains on track to increase by a substantial 2.3 million barrels a day this year to average a record 101.7 million a day, bolstered by the remnants of the post-pandemic rebound in consumption. Yet growth will slow by roughly 50% next year to 1.1 million barrels a day as that rebound peters out, and consumers turn to more efficient or electric vehicles. The rise in consumption can probably be satisfied by a similar increase in non-OPEC+ supplies, the agency said. via Bloomberg

Such a demand slowdown would help put countries on the path agreed at COP28 climate talks in the United Arab Emirates this week, which culminated in a pledge to transition away from fossil fuels.

From The TradersCommunity US Research Desk