IEA’s 2024 Oil-Demand Growth Forecast: What You Need to Know

IEA's 2024 Oil-Demand Growth Forecast: What You Need to Know

The IEA’s raised its oil demand growth forecast for next year to 1.2 million barrels a day from 1.1 million barrels a day previously.

Due to decreasing gasoil consumption in many of the top economies in the world, especially in Europe, and moderate winter temperatures, the International Energy Agency dropped its prediction for growth in oil demand this year.

According to the Paris-based group, the growth in oil demand is currently estimated to be 1.1 million barrels per day, down from 1.2 million barrels per day in its most recent monthly report. It remains projected that 103.2 million barrels will be utilized daily on average.

The OECD countries’ oil demand shrank by 70,000 barrels per day on an annual basis in the first quarter, which resulted in slower-than-anticipated growth and the revision. Throughout the quarter, demand for gasoil in Europe decreased by 140,000 barrels per day, partly due to a decrease in the number of diesel vehicles on the continent.

“Global growth is becoming increasingly dependent on developing economies as a result of the collapse in the OECD and the relatively strong non-OECD demand, which grew by 1.2 million barrels per day on average between 1Q and 2024,” the IEA stated.

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The information that was released on Wednesday comes as oil prices, which were last seen in mid-March, are still trading in a range. At present, the U.S. oil gauge, West Texas Intermediate (WTI), is trading at about $78 per barrel, while the international benchmark Brent crude is trading at about $82 per barrel.

Sticky inflation raises the possibility of higher-for-longer U.S. interest rates and depresses mood since usually higher rates reduce oil demand and strengthen the dollar. The Middle East crisis has not yet significantly impacted oil supplies; therefore traders are taking into account a reduced geopolitical risk premium.

Although the forecasts are relatively stable, the IEA increased its oil demand growth forecast for the upcoming year from 1.1 million barrels per day to 1.2 million barrels per day. An average of 104.3 million barrels are required daily to meet the total demand.

The Paris-based group states that demand forecasts are generally in line with the macroeconomic prognosis, with global economic growth expected to be 2.9% this year and next, below the average for 2010–2019.

The agency stated that “despite the fact that the outlook for the global economy has improved since the end of last year as a soft-landing scenario has become the dominant view, investors have recently lowered their expectations for interest rate cuts by central banks due to stubbornly high inflation readings.”

The Organization of the Petroleum Exporting Countries (OPEC) projects that global oil demand will rise by 2.2 million barrels per day this year and 1.8 million barrels per day the next year. The IEA’s oil demand calculations are still lower than theirs.

However, the forecast for 2025 remains unchanged at 104.5 mbd; while this year’s projection has been lowered to 102.7 million barrels per day from last year’s level of 102.9 million barrels per day.

As a result, there was a decrease in Canadian output due to some maintenance works and certain production limitations by Russia which were geared towards OPEC+ targets as maintained by IEA.

The non-OPEC+ countries are expected to continue leading in terms of world supply with a daily increase of 1.4 mbpd this year and next (IEA). Before that, the agency predicted an increase of 1.6 mbd through the end of 2024. The United States is expected to contribute about 40% of non-OPEC+ growth in 2025 and about 45% this year.

An increase of 330,000 barrels per day is projected in production by 2025 if the cuts are maintained. The OPEC+ production will slacken this year by 840,000 barrels per day if the organization keeps to its voluntary output cutbacks

The IEA reports that a decrease in middle distillate cracks, lower throughput levels, and less-than-anticipated demand growth contributed to a reduction in global refinery margins in April. Refinery output is predicted to increase by 1.8 million barrels per day in the second half of the year.

Thanks to greater refinery runs in OECD nations in the first quarter and better-than-anticipated Russian crude runs in March, global refinery output is expected to reach 83.4 million barrels per day this year, beyond the IEA’s prior prediction.

According to the agency, Russian crude exports decreased by 450,000 barrels per day to 7.3 million barrels per day in April. The country’s commercial profits also decreased, falling 6.5% to $17.2 billion from the previous month. Nonetheless, because higher prices more than offset lower volumes, oil export revenues stayed mostly unchanged.

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