IEA Forecasts Rapid Growth in Global Oil Demand in 2024

On Thursday, the International Energy Agency (IEA) announced that global oil demand is projected to increase more rapidly than initially anticipated in the upcoming year. This highlights a strong near-future outlook for oil consumption, despite the recent COP28 agreement aimed at shifting away from fossil fuels.

The producer group OPEC and the IEA, representing developed nations, still disagree significantly over the forecasts for 2024’s demand, even with the upgrades. Over the past years, these two organizations have disagreed on matters like future demand trends and the need to invest in fresh sources of supply.

The IEA indicated in its monthly report that global consumption is expected to increase by 1.1 million barrels per day in 2024, 130,000 bpd more than its earlier projection. The IEA attributed this increase to improved US economic growth and lower oil prices.

In its report, the agency, known for its advocacy of a rapid shift from fossil fuels, outlined the upward revision to its 2024 forecast towards the end of Page 4. This adjustment came after addressing various findings, such as a decrease in demand during the final quarter of 2023 and an increase in supply.

According to the IEA, the 2024 revision shows “a somewhat improved GDP outlook compared with last month’s report.”

“This applies especially to the U.S. where a soft landing is coming into view,” said the IEA. “Falling oil prices act as an additional boost to oil consumption.”

This week, oil prices dropped to a six-month low, around $72 per barrel. This decline occurred despite the announcement on November 30 by OPEC+—comprising OPEC oil-exporting nations and allied countries like Russia— regarding a fresh set of production cuts scheduled for the first quarter of 2024.

After the release of the IEA report, crude LCOc1 increased by over 2% on Thursday, trading at roughly $76.

In the report, the IEA reduced its projection for the increase in oil demand in 2023 by 90,000 barrels per day (bpd), now expecting a growth of 2.3 million bpd. Additionally, it revised its estimation for the fourth quarter, lowering it by nearly 400,000 bpd.

According to the IEA, the anticipated 50% reduction in demand growth for the upcoming year is due to several factors: slower-than-usual economic growth in significant economies, enhancements in efficiency, and the rapid growth of the electric vehicle market.

Despite the extension of supply cuts by OPEC+ into the first quarter of the upcoming year, the IEA noted that this move hasn’t significantly lifted prices, as increased output from other countries is expected to pose a challenge, acting as a counterforce to price improvement.

“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,” stated the report.

In its monthly report on Wednesday, OPEC maintained its estimate of 2.46 million barrels per day of growth in global oil demand in 2023. OPEC forecasts a 2.25 million bpd oil demand increase in 2024, consistent with last month’s assessment.

The gap between the 2024 forecasts of the IEA and OPEC has reduced slightly but remains at 1.15 million barrels per day (bpd), about 1% of the world’s daily oil consumption and Libya’s daily production.

Forecasters of oil demand are frequently forced to make significant adjustments in response to changes in the political environment and economic prospects, which this year included increasing interest rates and China removing its lockdowns on the coronavirus.