The world’s premier forecasters of oil demand growth, OPEC and IEA find themselves further apart than they have been in at least 16 years, as per Reuters research.
In a striking divergence, the world’s premier forecasters of oil demand growth, the Organization of the Petroleum Exporting Countries (OPEC) and the International Energy Agency (IEA), find themselves further apart than they have been in at least 16 years, as per Reuters research.
This stark contrast between the IEA, representing industrialized nations, and OPEC not only sends conflicting signals to traders and investors regarding the strength of the oil market in 2024 but also reflects varying perspectives on the pace of the global transition to cleaner energy sources.
In February of this year, the IEA projected a rise in demand by 1.22 million barrels per day (bpd) for 2024, whereas OPEC’s forecast for the same period stood at 2.25 million bpd, marking a substantial discrepancy equivalent to about 1% of world demand.
“The IEA has a very strong perception that the energy transition will move ahead at a much faster pace,” commented Neil Atkinson, a former head of the IEA’s Oil Markets Division. He noted that both agencies have entrenched positions, contributing to the significant disparity in their demand forecasts.
To contextualize this difference, Reuters conducted an analysis spanning from 2008 to 2023, along with data from the initial two months of 2024, covering a period marked by considerable oil demand volatility, including the 2008 financial crisis and the subsequent pandemic-induced demand shock and recovery.
During this 16-year span, Reuters’ analysis revealed that the 1.03 million bpd gap observed in February represented the largest disparity in per-barrel terms between the IEA and OPEC forecasts.
When questioned about the gap and the accuracy of its forecasts compared to OPEC’s, the IEA attributed the year’s demand slowdown to a return to pre-pandemic growth trends, supported by observable declines in oil deliveries data. However, the IEA refrained from commenting on the forecasts of other organizations.
Similarly, OPEC, while addressing the gap, emphasized the consistency of its 2023 demand growth forecast and refrained from commenting on the 2024 projections.
The disagreement extends to the medium term, with the IEA anticipating peak oil demand by 2030 as the world transitions to cleaner fuels, a view dismissed by OPEC. OPEC’s forecast out to 2045 does not anticipate a peak, citing expected growth outside industrialized nations and resistance to initial net-zero policies.
The IEA, originally established as an energy watchdog for industrialized nations, has shifted its focus toward advocating renewables and climate action, a move criticized by some OPEC members who view it as biased.
On the other hand, OPEC’s projections align more closely with those who anticipate oil demand peaking after 2030. Analysts point out that both agencies have historically made accurate demand forecasts, but OPEC might hold a stronger position on the issue of demand peaking in the coming decade.
As economic forecasts, oil demand predictions remain subject to revisions and are influenced by unforeseeable events. Despite projections of demand slowdown attributed to factors like the rise of electric vehicles, the IEA has repeatedly revised its forecasts upwards for 2024, a trend noted by industry experts.
Ultimately, while both the IEA and OPEC have demonstrated accuracy in forecasting demand developments, the debate over the timing of peak oil demand underscores the complexity of predicting long-term trends amidst evolving global energy dynamics.