The International Energy Agency (IEA) on Wednesday trimmed its forecast for 2024 oil demand growth, widening the gap with producer group OPEC in terms of expectations for this year’s global demand outlook.
The divide between the IEA, which represents industrialized countries, and the Organization of the Petroleum Exporting Countries sends divergent signals about oil market strength in 2024 and, over the longer term, about the speed of the world’s transition to cleaner fuels.
Global oil demand this year will grow by 1.1 million barrels per day (bpd), the Paris-based IEA said in a monthly report, down 140,000 bpd from the previous forecast, largely citing weak demand in developed OECD nations.
The agency said the lower 2024 forecast was linked to poor industrial activity and a mild winter sapping gas oil consumption, particularly in Europe, where a declining share of diesel cars was already undercutting consumption.
“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 agency said, noting though that the OECD slump was somewhat offset by resilient non-OECD demand led by China.
In its monthly report on Tuesday, OPEC stuck by its expectation that world oil demand will rise by 2.25 million bpd in 2024. The 1.15 million-bpd difference is about 1 per cent of world demand.
The gap between the IEA and OPEC is now even wider than it was earlier this year, when a Reuters analysis found that the 1.03 million-bpd difference in February was the biggest since at least 2008.
The two are closer in their projections for 2025. The IEA on Wednesday slightly raised its demand growth estimate to 1.2 million bpd. OPEC left its 1.85 million-bpd forecast unchanged.
The IEA also trimmed its estimates for oil supply in 2024, citing heavy outages in Brazil and logistical constraints in the U.S.
World supply will rise by 580,000 bpd this year to a record 102.7 million bpd, it said.
Last month, global supply growth was seen at 770,000 bpd.
The state of the supply-demand balance will inform decision-making by OPEC+ – which groups OPEC and allies led by Russia – on whether to extend voluntary oil output cuts into the second half of the year when it meets in June.
The IEA now estimates that the demand for OPEC+ crude plus inventories will average 41.9 million bpd in 2024, up slightly from 41.8 million bpd last month, implying a tighter overall market balance.
While OPEC on Tuesday sounded an upbeat tone on the global economic outlook, the IEA was more cautious.
Although the global demand economic outlook has improved since the end of last year, sticky inflation in major Western economies has pushed investors to dial back their expectations for central bank interest rate cuts, the IEA said.
High borrowing costs, which have been in place for months in the U.S. and Europe, dampen economic growth and oil demand.
Next year, the market looks more balanced overall, the IEA predicted, with supply rising outside OPEC.
Even if OPEC+ voluntary production cuts were to stay in place, global oil supply could jump by 1.8 million bpd in 2025, compared with this year’ 580,000-bpd increase, the agency forecast, largely on the strength of non-OPEC+ output growth.
The IEA and OPEC also differ over the demand outlook in the medium and long term.
The IEA expects oil demand to peak by 2030. OPEC thinks oil use will keep rising for the next two decades and has not forecast a peak.