The International Energy Agency (IEA) on Thursday lowered its forecast for growth in oil demand in 2024, suggesting harsher global economic conditions and progress on energy efficiency will weigh on consumption.
In its monthly report, the IEA forecast demand for oil will rise by 880,000 barrels per day (bpd) in 2024, down from its previous forecast of 1 million bpd, based on broader economic concerns and a faster adoption of electric vehicles among other energy efficiency measures.
However, the Paris-based agency that advises the United States and other industrialised countries, raised its 2023 demand forecast to 2.3 million bpd, from a previous estimate of 2.2 million.
OPEC and its allies, known as OPEC+, began limiting supplies in 2022 to support prices.
In September, global benchmark Brent hit 10-month highs after Saudi Arabia and Russia extended their combined 1.3 million bpd cuts until the end of the year.
“If extra cuts are unwound in January, the balance could shift to surplus, which would go some way to help replenish depleted inventories,” the agency said.
Although Russia pledged to cut crude exports until the end of 2023, according to the IEA’s estimates Moscow’s total exports of crude oil and products in September rose by 460,000 bpd to 7.6 million bpd, with crude accounting for 250,000 bpd of the increase. The jump in exports highlights the difficulty the West has faced in trying to reduce Russian exports and revenue to Moscow amid its war with Ukraine.
Last year, the IEA predicted harsh Western sanctions would lead to a collapse in Russian energy exports.
ECONOMIC HEADWINDS, GEOPOLITICAL RISK
Oil prices fell sharply last week as a darkening economic outlook intensified fears of slower growth in demand, eclipsing supply concerns. But prices spiked early this week after Palestinian Islamist group Hamas’ attack on Israel, which has ignited fears that a wider conflict could exacerbate the existing supply deficit.
So far, however, there has been no direct impact on supplies, the IEA said, adding that it stood ready to act if needed to ensure adequate supplies.
Meanwhile, as 2024 beckons, a high interest rate environment in key Western economies aimed at bringing down inflation and the consequential stronger U.S. dollar is dampening demand in lower-income emerging markets like Nigeria, Pakistan and Egypt, the IEA said.
Still, so far, major oil consumers, particularly China, India and Brazil, continue to see solid growth in demand, it said.