The International Energy Agency (IEA) on Tuesday raised its oil demand growth forecasts for this year and next despite slower economic growth in nearly all major economies, although its 2024 outlook remains much lower than that of producer group OPEC.
The Paris-based IEA said the market could shift into surplus at the start of 2024 having been kept in a “significant deficit” through year-end by voluntary cuts from Saudi Arabia and Russia which last until the end of December.
“For now, with demand still exceeding available supplies heading into the Northern Hemisphere winter, market balances will remain vulnerable to heightened economic and geopolitical risks – and further volatility ahead,” the IEA said in a monthly report.
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Oil has weakened to around US$82 a barrel for Brent crude from a 2023 high in September near US$98. Concern about economic growth and demand has pressured prices, despite support from supply cuts by OPEC and its allies, and conflict in the Middle East.
The IEA joins the Organization of the Petroleum Exporting Countries in raising its oil demand growth forecast for 2023. Demand in 2023 has been supported by resilient U.S. deliveries and record September demand from China, the IEA said.
In 2023, the IEA expects world demand to rise by 2.4 million barrels per day (bpd), up from 2.3 million bpd seen previously and bringing its view closer to that of OPEC, which on Monday nudged up its forecast to 2.46 million bpd.
For 2024, the IEA raised its oil demand growth forecast to 930,000 bpd from 880,000 bpd. Expectations are underpinned by hopes of interest rate cuts and the recent fall in crude prices, the IEA, the energy adviser to industrialized nations, said.
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This is still well below OPEC’s forecast of 2.25 million bpd. The difference – 1.32 million bpd – is equivalent to roughly one per cent of daily world oil use and translates into more than the daily production of an OPEC member such as Libya.
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OPEC and the IEA have clashed in recent years over issues such as the long-term oil demand outlook and the need for investment in new supplies.
The IEA said the 2024 demand slowdown will arise as “the last phase of the pandemic economic rebound dissipates and as advancing energy efficiency gains, expanding electric vehicle fleets and structural factors reassert themselves.”
The 2024 outlook will be in focus at the next meeting of OPEC and its allies, known as OPEC+, on Nov. 26. The group’s existing deal limits supply into 2024, although the extra Saudi and Russian voluntary cuts last until the end of December.