IEA lowers the 2024 oil demand forecast, widening the gap with OPEC on global demand growth expectations.
The International Energy Agency (IEA), which revised its forecast downward on Wednesday, has put more distance between itself and the Organisation of the Petroleum Exporting Countries (OPEC) regarding expectations for growth in global oil demand in 2024.
This divergence in outlooks sends mixed signals about the robustness of the oil market in 2024 and highlights contrasting perspectives on the pace of the global shift toward cleaner energy.
In its latest monthly report, the Paris-based IEA projected global oil demand to increase by 1.1 million barrels per day (bpd) this year, a reduction of 140,000 bpd from its previous estimate. The revision primarily reflects weaker demand in developed OECD countries, attributed to sluggish industrial activity and a mild winter that reduced gas oil consumption, especially in Europe. The region’s declining share of diesel vehicles further diminished demand.
“Combined with weak diesel deliveries in the United States at the start of the year, this was enough to tip OECD oil demand in the first quarter back into contraction,” the IEA stated. However, this decline was somewhat offset by resilient demand from non-OECD countries, led by China.
In contrast, OPEC maintained its forecast for global oil demand growth in 2024, expecting an increase of 2.25 million bpd. This discrepancy of 1.15 million bpd, approximately 1% of global demand, marks a significant divergence between the two organizations. The gap has widened since February, when a Reuters analysis found a difference of 1.03 million bpd, the largest since at least 2008.
Looking ahead to 2025, the IEA slightly increased its demand growth estimate to 1.2 million bpd, while OPEC left its forecast unchanged at 1.85 million bpd, indicating closer alignment for that year.
Supply Adjustments
The IEA also revised its oil supply estimates for 2024, citing significant outages in Brazil and logistical issues in the United States. World supply is now expected to rise by 580,000 bpd this year, reaching a record 102.7 million bpd, down from the previous month’s forecast of 770,000 bpd.
These supply-demand dynamics will play a crucial role in the decision-making process of OPEC+—which includes OPEC members and allies led by Russia—regarding the extension of voluntary oil output cuts into the second half of the year. The IEA’s report estimates that the demand for OPEC+ crude, including inventories, will average 41.9 million bpd in 2024, a slight increase from the previous month’s forecast of 41.8 million bpd, suggesting a tighter overall market balance.
Economic Perspectives
While OPEC expressed optimism about the global economic outlook, the IEA adopted a more cautious stance. Despite an improved economic forecast since the end of last year, persistent inflation in major Western economies has led investors to temper their expectations for central bank interest rate cuts, the IEA noted. High borrowing costs, prevalent for several months in the U.S. and Europe, are dampening economic growth and, consequently, oil demand.
For 2025, the IEA anticipates a more balanced market, with supply growth largely driven by non-OPEC+ countries. Even if OPEC+ maintains its voluntary production cuts, global oil supply could rise by 1.8 million bpd in 2025, compared to this year’s increase of 580,000 bpd.
Long-Term Demand Outlook
The IEA and OPEC also have differing views on the medium and long-term demand outlook. The IEA predicts that oil demand will peak by 2030, reflecting a more rapid transition to renewable energy sources. Conversely, OPEC expects oil consumption to continue rising for the next two decades and has not projected a peak in demand.
These contrasting perspectives highlight the ongoing uncertainty in the global oil market, driven by varying economic conditions, supply dynamics, and the pace of the energy transition. The evolving forecasts from the IEA and OPEC will be closely watched as the world navigates the complexities of energy demand and sustainability.