IEA raises its forecast for oil demand growth for the third month in a row

The International Energy Agency on Thursday again raised its forecast for global oil demand growth in 2024, but its forecast is still much lower than that of its OPEC counterpart.

According to Reuters, the agency predicted, in the third consecutive monthly increase, that global oil consumption would rise by 1.23 million barrels per day in 2024, compared to OPEC’s expectation of an increase of 2.25 million barrels.

The latest amendment came to raise the growth forecast from the International Energy Agency, which represents an increase of 180 thousand barrels over the previous forecast, based on the improvement in global economic growth and the decline in crude prices in the fourth quarter in addition to China’s expansion in the petrochemical sector.

“Consensus on the economic outlook has improved somewhat over the past few months following the recent shift in central bank policies,” the IEA said in its monthly report for January.

“The decline in oil prices in the fourth quarter of 2023 represents an additional driving factor,” she added.

Oil prices began the new year on a decline, pressured by the impact of uncertainty surrounding demand, which outweighed the impact of a new round of supply cuts from OPEC+ and escalating tension in the Middle East.

Brent crude was trading at about $78 per barrel on Thursday, after losing about 10% of its price in 2023, ending the year at $77.04 per barrel.

The International Energy Agency said that the expected decline by half in the annual demand growth rate in 2024 came as a result of the incomplete recovery after the pandemic, the modest growth of major economies, improved energy efficiency, and the significant increase in the number of electric cars.

The escalating geopolitical tension in the Middle East region has confused the markets, and the agency says that the region passes through a third of the world’s seaborne oil trade.

The agency said that, barring a major disruption to oil flows from that region due to current events, “it appears that good supplies will reach the market in 2024,” even though OPEC and the OPEC+ bloc have implemented a series of production cuts since late 2022 to support the market. The first new cut for the first quarter of the year took effect this month.

The agency expected that these cuts may make the markets tend to feel a limited supply deficit at the beginning of the year, but strong growth from producers outside OPEC+, including the United States, Brazil, and Guyana, could lead to a large surplus if the voluntary cuts are abandoned in the second quarter of the year.