IEA raises 2024 oil demand forecast for third time, but lower than OPEC projections

The International Energy Agency (IEA) on Thursday made a further upward revision to its 2024 oil demand growth forecast, though its projection remains dramatically lower than producer group OPEC’s expectations.

The Paris-based agency’s forecast, its third consecutive upward revision in as many months, predicts that global oil consumption will rise by 1.24 million barrels per day (bpd) in 2024, compared with OPEC’s 2.25 million bpd projection.

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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 IEA’s latest upward revision, up 180,000 bpd from its previous projection, was linked to improving global economic growth and lower crude prices in the fourth quarter plus China’s expanding petrochemicals sector.

“The consensus economic outlook has improved somewhat over the last few months in the wake of the recent dovish pivot in central bank policy,” the IEA said in its January report.

“The fourth-quarter 2023 slump in oil prices acts as an additional tailwind.”

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

Brent crude was trading around $78 a barrel on Thursday, having lost about 10 percent in 2023 to finish the year at $77.04.

The IEA said the expected halving in the rate of demand expansion year on year in 2024 is the result of post-pandemic recovery being all but complete, lackluster economic growth in major economies, energy efficiency improvements and a booming electric vehicle fleet.

Market concerns

Rising geopolitical tensions in the Middle East, which the IEA says accounts for a third of the world’s seaborne oil trade, has peturbed markets.

Attacks by Iran-allied Houthi militia on ships in the Red Sea since November have slowed trade between Asia and Europe and alarmed major powers in an escalation of the war between Israel and Palestinian Hamas militants in Gaza.

This could disrupt the flow of oil via key trade chokepoints, though a rising number of ship owners are diverting cargoes away from the Red Sea.

Barring significant disruption to oil flows, the IEA said “the market looks reasonably well supplied in 2024” even though OPEC and the wider OPEC+ alliance have implemented a series of output cuts since late 2022 to support the market. A new cut for the first quarter took effect this month.

While these cuts may tip the market into a small deficit at the start of the year, the IEA predicted that strong growth from producers outside the OPEC+ group -- including the United States, Brazil, and Guyana -- could lead to a substantial surplus if the extra voluntary cuts are unwound in the second quarter.

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