IEA Ups 2024 Oil Demand Growth

The International Energy Agency (IEA) made a further upward revision to its 2024 oil demand growth forecast on Thursday, citing improved economic growth and lower crude prices in the fourth quarter. "The consensus economic outlook has improved somewhat over the last few months in the wake of the recent dovish pivot in central bank policy," the IEA said in its monthly report. "The fourth-quarter 2023 slump in oil prices acts as an additional tailwind." Global oil consumption is set to rise by 1.24 million barrels per day (bpd) in 2024, the agency forecast, up 180,000 bpd from its previous projection. The increase is largely driven by China's expanding petrochemicals sector.

The revised forecast is the Paris-based agency's third consecutive upward revision in as many months for 2024 oil demand growth. But it remains lower than that of oil producer group OPEC, which sees demand growth of 2.25 million bpd this year. The IEA's projected increase is half the 2.3 million bpd growth last year, with the post-pandemic recovery all but complete, lacklustre economic growth in major economies and the impact of energy efficiency improvements.

It cited economic headwinds, tighter efficiency standards and growth in electric vehicles for the slowing demand growth, which was sharply down in the last three months of 2023. Much of the slowing demand has mirrored falling demand for post-pandemic travel demand in China, which drives much of the world's oil demand growth. The pace of demand growth will continue to be led by China through 2024, the IEA said, with the world's second-largest economy accounting for almost 60% of this year's oil demand growth. Meanwhile, the world's oil supply will continue to grow due to "record-setting output" from the United States, Brazil, Guyana and Canada, it said. This high production will lead to a new high in the world's oil supply this year, it said.

However, the IEA sounded a note of caution that conflict in the Middle East could cause serious disruptions in the market, particularly for oil flows via the Red Sea and the Suez Canal. Some 10% of the world's oil trade by sea passes trough the Suez Canal, and shipping delays add pressure to global supply chains, as well as pushing up frieght costs. The IEA warned that "a rising number of ship owners are diverting course from the Suez Canal, delaying deliveries of oil and other commodities". In a report earlier this week, the IEA said that the world added 50% more renewable energy capacity in 2023 over the previous year, but warned more is needed in the battle against climate change.