IEA: Oil Demand to Increase in 2024

The International Energy Agency (IEA) has released a revision of its oil demand growth forecast for 2024, and their estimate appears to be significantly lower than that provided by OPEC countries. The Paris-based agency’s forecast is the third consecutive upward revision in as many months and predicts that global oil consumption will rise by 1.24 million barrels per day (bpd) in 2024, compared to OPEC’s projection of 2.25 million bpd.

The IEA and OPEC have clashed in recent years over issues such as long-term demand and the need for investment in new supplies. The latest upward revision by the IEA, by 180,000 barrels per day compared to the previous forecast, was linked to improvements in global economic growth and lower crude oil prices in the fourth quarter, along with a growing Chinese petrochemical sector.

– The drop in oil prices in the fourth quarter of 2023 acts as an additional tailwind – stated the IEA.

Oil prices started the year on a weak footing as demand uncertainty mitigated the impact of a new round of supply cuts by OPEC and its allies, collectively known as OPEC+, as well as rising tensions in the Middle East.

Brent crude was trading at around $78 per barrel on Thursday, after losing about 10 percent in 2023 and finishing the year at $77.04. The IEA noted that this was expected given the weak economic growth of major countries, improvements in energy efficiency, and the increasing electric vehicle fleet.

Market Tensions

Rising geopolitical tensions in the Middle East, which the IEA says accounts for a third of global maritime oil trade, have unsettled markets. Attacks by Houthi rebels, allies of Iran, on ships in the Red Sea since November have slowed trade between Asia and Europe and alarmed major powers due to the escalation of the war between Israel and Hamas in Gaza.

This could disrupt the flow of oil through key trading hubs, although an increasing number of shipowners are diverting cargo away from the Red Sea.

Excluding significant disruptions in oil flow, the IEA stated that ‘the market appears to be fairly well supplied in 2024,’ although OPEC and the broader OPEC+ alliance have implemented a series of production cuts since late 2022 to support the market. A new cut for the first quarter came into effect this month.

While these cuts could lead the market to a slight deficit at the beginning of the year, the IEA projected that strong growth from producers outside the OPEC+ group – including the United States, Brazil, and Guyana – could lead to a significant surplus.