Crude demand expectations fall for 2024 as trends shift back to pre-COVID pattern – IEA

LONDON (ICIS)–The International Energy Agency (IEA) on Friday cut crude oil demand forecasts for the year, with rates expected to fall further next year as consumption returns to the pre-COVID-19 trend, increasing the odds of a peak in oil consumption this decade, the agency said.

The IEA expects crude demand growth to average 1.2 million barrels/day this year, an increase from October projections of 900,000 barrels/day but a decline from the 1.3 million barrels/day projected in its monthly oil market report in March.

This level of growth is expected to slow next year to 1.1 million barrels/day, representing a shift back to the trajectory of crude demand before the pandemic, increasing the chances that global demand will peak this decade, according to the agency.

“Global oil demand growth is currently in the midst of a slowdown… bringing a peak in consumption into view this decade,” said Toril Bosoni, IEA head of oil industry, and markets and oil market analyst Ciaran Healy.

“This is primarily the result of a normalization of growth following the disruptions of 2020-2023, when oil markets were shaken by the COVID-19 pandemic and then the global energy crisis sparked by Russia’s invasion of Ukraine,” they added.

Global crude oil demand 2011-25 (Source: IEA)

Increasing fuel efficiency standards and electric vehicles comprising a larger chunk of the auto market are also affecting the rate of oil demand growth, the IEA added.

Crude supply growth is expected to average 770,000 barrels/day this year, led by non-OPEC sources, particularly the US, offsetting a projected 820,0000 barrel/day decline year on year from OPEC+ cuts. Production growth could firm to 1.6 million barrels/day next year.

Despite the projected demand declines this year, compared with growth of 2.3 million barrels/day in 2023, pricing has risen sharply in recent weeks, up by $8/barrel from early March to more than $90/barrel this week, on heightened geopolitical tensions and the prospect of a tighter supply-demand balance this year.

“Russian refinery outages added to product market unease, while OPEC+ put pressure on some countries to increase compliance with agreed voluntary production cuts through Q2 2024,” the IEA said in its latest monthly oil market report.

“Escalating oil supply security concerns are set against a backdrop of solid global oil demand growth of 1.6 million barrels/day in the first quarter and a more upbeat outlook for the global economy,” the agency added.

In its latest oil forecast released this week, OPEC left GDP and crude demand growth expectations unchanged at 2.8% and 2.2 million barrels/day respectively.

Thumbnail photo: An oil pump jack at the Vaca Muerta shale oil and gas play, Argentina. Source: Matias Baglietto/NurPhoto/Shutterstock