IEA lowers oil demand projections
In its latest report, the International Energy Agency has revised its projections for oil-demand growth in the coming year and increased its estimates for supply. This development suggests that the market could potentially face an oversupply situation, further supporting the agency’s anticipation of a significant surplus in the oil market over the next decade.
The organization based in Paris has revised its projections for next year’s oil-demand growth. It now expects a daily increase of 980,000 barrels, down from the previous estimate of 1 million barrels. The organization now predicts that total demand will average at 104 million barrels per day.
In its latest monthly report, it stated that demand in OECD countries is experiencing a structural decline due to the industry’s adoption of energy-efficiency measures and the introduction of electric vehicles. Additionally, despite major central banks beginning to reduce interest rates, economic growth remains sluggish.
According to the latest forecast, demand is projected to increase by 970,000 barrels per day this year, slightly higher than the previous estimate of 960,000 barrels per day. This growth is primarily driven by developing nations. According to estimates, the total demand is projected to reach an average of 103.1 million barrels per day.
During the second quarter, there was a noticeable deceleration in growth, with an increase of 710,000 barrels a day. This represents the smallest quarterly rise in over a year, according to the IEA. Oil consumption in China experienced a decline in both April and May, with a particularly weak demand for industrial fuels and petrochemical feedstocks.
The global slowdown is a result of the natural adjustment of growth rates following the impact of Covid-19 in recent years, as stated by the agency. As flight activity increases over the summer, the demand for jet fuel is also on the rise, reaching its midyear peak. Nevertheless, the rate of growth is decelerating significantly in comparison to the levels observed in 2023, during the concluding phases of the air travel rebound following the pandemic.
The disparity between the projections of the IEA and the Organization of the Petroleum Exporting Countries has grown larger. The cartel predicts that global oil demand will increase by 2.2 million barrels a day this year and 1.8 million barrels a day in 2025.
Thursday’s report coincides with Brent crude trading at approximately $85 per barrel, while the U.S. oil gauge, West Texas Intermediate, hovers around $82 per barrel.
Crude prices rebounded and turned positive after a slight dip earlier this week. This was driven by encouraging U.S. data, which revealed a decrease in crude and gasoline inventories during the July 4 holiday week. Nevertheless, the current gains are being limited due to the uncertainty surrounding the future of interest rates in the U.S. and concerns about the demand outlook in China, which have been fueled by disappointing consumer prices data for June.
The projected global oil supply for this year has been revised to an average of 103 million barrels per day, with a further increase to 104.8 million barrels per day expected by 2025. These figures surpass the International Energy Agency’s previous estimations of 102.9 million barrels per day and 104.7 million barrels per day for the respective years. According to the agency, global supply is projected to be led by non-OPEC+ countries, with an anticipated increase of 1.5 million barrels a day in 2024 and 1.8 million barrels a day in 2025.
The IEA plans to revise its supply forecast for OPEC+ once the alliance confirms its intention to reduce some of its voluntary output restrictions, as outlined in a roadmap shared with the markets in June. In a move that reflects a careful consideration of market conditions, the cartel and its allies have decided to extend their voluntary curbs of 2.2 million barrels a day until the end of September. Additionally, they have outlined a plan to gradually unwind these curbs from October 2024 to September 2025.
According to estimates from the IEA, the current projection is for OPEC+ production to decrease by 740,000 barrels per day this year, assuming the group maintains its voluntary output cuts.
Meanwhile, Russia experienced a decrease in crude exports of 160,000 barrels a day in June, bringing the daily total to 7.6 million barrels. Additionally, commercial revenue dropped by $190 million compared to the previous month, amounting to $16.7 billion.
Russia’s crude oil supply remained relatively stable at 9.22 million barrels per day in June, exceeding the targets set in line with OPEC+ by 240,000 barrels per day. In June, the IEA reported that production from the group’s 18 countries subject to quotas exceeded the implied target of 33.85 million barrels a day by 580,000 barrels a day.
