Global oil demand growth losing momentum as post-pandemic rebound phase ends – IEA

LONDON (ICIS)–The momentum of crude oil demand growth is starting to slow as the post-pandemic rebound in consumption nears its conclusion, the International Energy Agency (IEA) said on Thursday, despite arctic conditions in January tightening market balances.

“The expansive post-pandemic growth phase in global oil demand has largely run its course,” the agency said in its latest report on oil market conditions.

The IEA projects that China, Brazil and India will account for nearly 80% of the estimated 1.2m bbl/day demand growth that the agency is forecasting for the year, half the levels seen the previous year.

The IEA demand growth estimate is a sharp contrast to the 2.2m bbl/day demand growth forecast by OPEC, which it attributes largely to transportation and petrochemicals sector consumption.

The estimate is also an increase from earlier IEA projections for 2024, from 900,000 bbl/day in October 2023 to 1.1m bbl/day in December, and up again to 1.2m bbl/day in January.

Strong output growth in the US, Brazil, Guyana and Canada is expected to outweigh consumption increases this year, the IEA said, but extreme January weather in northern America coinciding with fresh supply cuts by OPEC+ countries drove a “massive” decline in production.

Oil supplies declined 1.4m bbl/day in January on the back of the production cuts and disruptions seen during the month, but a wave of non-OPEC output growth is expected to kick back in during the second quarter, IEA added.

This is expected to drive global oil supply growth in 2024 to 1.7m bbl/day, significantly outstripping demand growth, with the IEA estimating that 95% of the increase to come from non-OPEC+ countries.

Weak economic growth and subdued demand has kept prices subdued despite escalating Middle East tensions, with Brent April futures values gradually deflating this week to $80.90/bbl in Thursday trading.

A substantial disparity between supply and demand could keep prices lower, particularly in light of global conflict, the IEA added, but limited reserves could result in volatility in the event of substantial disruption.

Given heightened geopolitical risks and low global oil inventories, a modest surplus may help contain market volatility,” the IEA said.

“Low oil inventories exacerbate the price impact of supply and demand shocks and may limit the industry’s ability to respond to unexpected strength in demand or disruptions to supply,” it added.

Thumbnail photo:The Mittelplate drilling station in Germany (Source: Olaf Doering/imageBROKER/Shutterstock)