Oil Demand to Hit Record High in 2024, IEA Says

The International Energy Agency predicts a robust growth in oil consumption and supply, amid market volatility and energy transition.

by Motoni Olodun

The International Energy Agency (IEA) has released its latest oil market report, forecasting a strong recovery in global oil demand in the next two years. According to the IEA, oil demand is expected to grow by 2.4 million barrels per day (mb/d) in 2023 and reach a record annual high of 102.9 mb/d in 2024.

The IEA’s projections are based on the resilience of US oil deliveries, which were stronger than earlier data suggested, and the surge in Chinese oil demand in September, which reached a new peak of over 17 mb/d, driven by a thriving petrochemical industry. However, the IEA also noted that the high demand in China has negatively impacted petrochemical producers in other regions, especially in Europe, Asia, and Oceania.

The IEA report also highlighted the steady increase in global oil supply, with October’s output rising by 320 thousand barrels per day (kb/d) compared to the previous month. The report said that concerns about the Israeli-Hamas conflict escalating into a wider regional crisis, disrupting oil supply flows, have not materialized so far.

The IEA also noted that the market rally that pushed benchmark oil prices towards triple digits in September reversed sharply in October, despite continued tight crude supplies and an intensifying conflict in the Middle East. As of Wednesday, November 15, Brent crude was $82.81 per barrel (7:20 AM, GMT+1).

The report mentioned that in early November, major oil exporters Saudi Arabia and Russia confirmed they would continue their extra voluntary output cuts until the end of 2023. These reductions are expected to maintain a substantial shortage in the oil market through year-end. The OPEC+ alliance, comprising both countries, is currently pumping 900 kb/d below the demand for their crude oil.

Meanwhile, in Q3/2023, the IEA said that global crude oil inventories took a massive dip, plummeting by 140 million barrels to reach a new low. This drop was mainly due to refineries increasing their activity before seasonal maintenance. However, the pace of demand growth is anticipated to slow down, potentially leading the market into a surplus as we head into 2024.

Presently, demand continues to outpace available supplies, especially with the onset of the Northern Hemisphere winter. During the Financial Times Asia Commodities Summit on Wednesday, November 2023, Giovanni Serio, the Global Head of Research at independent oil trader, Vitol, said that the global oil market is currently fairly balanced.

Serio said oil demand globally has exceeded 2019 levels and is expected to continue growing as oil intensity – the volume of oil consumed per unit of GDP – for most economies has returned to pre-pandemic levels except in the United States.

He stated further that regarding supply in the oil market, there is a need to limit it, even with the implementation of extra reductions by significant oil producers like Saudi Arabia. This necessity remains despite relatively low investments in the oil sector in recent years.

He also highlighted that the production increase from non-OPEC countries has surpassed previous peaks and is still rising while noting that Nigeria’s oil output has notably exceeded expectations, contributing to the overall increase in global oil production.

The IEA report comes amid growing concerns about the environmental and social impacts of fossil fuels, as well as the transition to cleaner and renewable energy sources. The IEA has previously urged governments and companies to take urgent action to reduce greenhouse gas emissions and achieve net-zero targets by 2050.

Despite the challenges and uncertainties facing the oil industry, the IEA report also suggests that there are opportunities and innovations that can help shape a more sustainable and resilient future for the sector and the world.

Source: Nairametrics

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