quick look
- The International Energy Agency raised its forecast for oil demand growth in 2024 for the fourth time since November due to the disruption of shipping in the Red Sea due to Houthi attacks.
- Despite the upward revision, the IEA's forecasts remain much less optimistic than those of the Organization of the Petroleum Exporting Countries (OPEC), with a gap of approximately 1 million barrels per day.
- Oil prices rose following the IEA report, with Brent crude reaching its highest levels since November.
The International Energy Agency (IEA) recently revised its 2024 oil demand growth estimates upward, the fourth revision since November. This review comes in the wake of increased disruptions to shipping in the Red Sea, primarily due to Houthi attacks. Despite this, the IEA's position on oil demand growth remains significantly less optimistic compared to OPEC's optimistic forecasts. The continuing divergences between the IEA and OPEC are nothing new, reflecting long-standing disagreements over long-term demand forecasts and the necessity of new investments in oil supplies.
Analysis of revised forecasts and market reactions
In its latest assessment, the International Energy Agency expects global oil demand to rise by 1.3 million barrels per day in 2024, an upward revision of 110,000 barrels per day from the previous forecast. This forecast expects a slight supply deficit after the cuts are extended by OPEC+ members, a shift from previous expectations of a surplus. The issuance of the report led to a noticeable rise in oil prices, with Brent crude reaching its highest levels since last November. Analysts, including Giovanni Stanovo of UBS, described the IEA report as “overly optimistic,” pointing to significant revisions in demand growth and lower supply growth estimates.
The way forward amid economic and geopolitical challenges
Despite the positive reviews, the IEA report highlights several fundamental challenges. The agency acknowledges the mitigating impact of the uncertain economic landscape on oil demand, despite the temporary spike caused by shipping disruptions. These disturbances, particularly in the Red Sea, necessitated the construction of longer trade routes, such as the Cape of Good Hope, which swelled the volume of barrels at sea. In addition, the report highlights the pivotal role of non-OECD countries in driving future growth, albeit with a gradual decline in China's demand growth dominance. On the supply side, growth from non-OPEC+ countries is expected to outpace demand expansion in 2024, despite recent production cuts by some OPEC+ members aimed at tightening market balance.
While the International Energy Agency has revised its 2024 oil demand growth forecast upward for the fourth time, reflecting immediate concerns such as shipping disruptions in the Red Sea, its outlook remains far less optimistic than OPEC's. This continuing divergence highlights the complex economic, geopolitical and market dynamics shaping the global oil landscape.
