The International Energy Agency (IEA) expects a more significant slowdown, while the producer organisation OPEC remains hopeful, driven by China-led growth, casting doubt on the growing gap in oil demand predictions for 2024 due to demand destruction in Nigeria.
For years, OPEC and the IEA, representing industrialised nations, have been locked in disputes regarding long-term oil demand projections and the necessity of investing in new supplies.
In their monthly report released on Thursday, the IEA revised its 2024 oil demand growth forecast down to 880,000 barrels per day from the previous estimate of 1 million barrels per day. This adjustment was attributed to the gloomier global economic conditions and advancements in energy efficiency that are expected to suppress consumption.
In stark contrast, OPEC maintained its outlook for a robust 2.25 million barrels per day increase in oil demand in 2024. The discrepancy between the two forecasts, amounting to 1.37 million barrels per day, represented over 1% of the world’s daily oil consumption.
The growth in oil demand serves as a crucial indicator of market strength, influencing prices and impacting fuel costs for both consumers and businesses. It also plays a significant role in shaping the supply policies formulated by OPEC and its allies, collectively known as OPEC+.
“In 2024, solid global economic growth, driven by continued progress in China, is anticipated to further bolster oil consumption,” stated OPEC in its monthly report.
Interestingly, both forecasters seemed to align more closely on the demand outlook for the current year. The IEA adjusted its growth projection for this year to 2.3 million barrels per day, bringing it in closer alignment with OPEC’s forecast of 2.44 million barrels per day, which remained unchanged in their latest report.
However, the IEA highlighted a concerning trend in its report, revealing signs of demand destruction brought about by rising oil prices and surging electric vehicle sales. In September, crude oil prices approached the $100 per barrel mark, only to fall due to economic apprehensions. The market then experienced another surge on Monday, fueled by concerns that the tensions between Israel and the Palestinian group Hamas could escalate, potentially disrupting the supply.
The IEA voiced its concerns, stating, “There has been evidence of substantial demand destruction, particularly in lower-income countries like Nigeria, Pakistan, and Egypt, along with indications of accelerating declines within some OECD markets, including the United States.”
Conversely, OPEC continued to anticipate an increase in oil demand within the Organisation for Economic Co-operation and Development (OECD) countries in 2024, whereas the IEA predicted a “likely permanent decline” in this segment.
The IEA also projected a 250,000 barrels per day decrease in gasoline demand in OECD countries for the upcoming year. Factors cited for this decline included increasing efficiencies and growing electric car sales, which are expected to dampen the demand for traditional gasoline-powered vehicles.
Demand forecasts in the oil industry are often subject to significant revisions, influenced by shifting economic landscapes and geopolitical uncertainties. This year, these variables included China’s easing of coronavirus restrictions and the rise in interest rates, further complicating the task of oil demand prediction.