- IEA and OPEC differ in terms of global oil demand forecast for May 2024.
- The IEA expects oil demand to peak by 2030 while OPEC expects oil use to keep rising for the next two decades.
The International Energy Agency (IEA), in its May 2024 Oil Market Report, reduced its forecast for 2024 oil demand growth.
According to the report, global oil demand will grow by 1.1 million barrels per day (bpd) this year, a reduction of 140,000 bpd from the previous forecast. This, as stated by IEA, is mainly due to weak demand in developed Organisation for Economic Co-operation and Development (OECD) nations.
Meanwhile, OPEC, in its monthly oil market report for May, projects a healthy global oil demand growth of 2.2 million bpd for 2024, followed by a robust growth of 1.8 million bpd next year, consistent with last month’s assessments.
The divide between the IEA, which represents industrialised countries, and OPEC 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.
The agency linked the lower 2024 forecast 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 added.
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% 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. On Wednesday, the IEA slightly raised its demand growth estimate to 1.2 million bpd. OPEC left its 1.85 million bpd forecast unchanged.
The IEA also reduced its estimates for oil supply in 2024, citing heavy outages in Brazil and logistical constraints in the United States. According to the agency, world supply will rise by 580,000 bpd this year to a record 102.7 million bpd. 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.
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 United States and Europe, dampen economic growth and oil demand. Furthermore, the IEA predicted that next year, the market looks more balanced overall, with supply rising outside OPEC.
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.