The International Energy Agency (IEA) on Friday said demand growth for oil next year will be slower than previously forecast, citing lacklustre macroeconomic conditions, a post-pandemic recovery running out of steam and the burgeoning use of electric vehicles. Growth is forecast to slow to 1 million barrels per day (bpd) in 2024, the Paris-based energy watchdog said in its August monthly oil market report, down by 150,000 bpd from its previous forecast.
“The global economic outlook remains challenging in the face of soaring interest rates and tighter bank credit, squeezing businesses that are already having to cope with sluggish manufacturing and trade,” the IEA said. Tighter supply has underpinned a rally in oil prices, with Brent crude trading above $88 a barrel on Thursday, its highest since January.
The IEA warned global inventories could draw down sharply over the rest of 2023, potentially driving prices still higher. In 2023, global oil demand is set to expand by 2.2 million bpd, buoyed by summer air travel, increased oil use in power generation and surging Chinese petrochemical activity. That forecast is largely unchanged from the IEA’s previous estimate. Demand is forecast to average 102.2 million bpd this year, with China accounting for more than 70% of growth, despite concerns about the economic health of the world’s top oil importer.
Demand hit a record 103 million bpd in June. The IEA said August could see yet another peak. OPEC, in its monthly forecast released on Thursday, reiterated its annual oil demand forecasts, expecting a rise by 2.25 million bpd in 2024, compared with growth of 2.44 million bpd in 2023. On the supply side, output has slowed considerably in recent months, spearheaded by voluntary reductions from Saudi Arabia. OPEC and its allies, together known as OPEC+, began limiting supplies in late 2022 to bolster the market and in June extended supply curbs into 2024.
If current targets by OPEC+ are maintained, oil inventories could draw by 2.2 million bpd in the third quarter, and 1.2 million bpd in the fourth quarter, potentially fuelling another hike in prices, the IEA predicted on Friday.