The International Energy Agency (IEA) has projected a faster-than-expected rise in world oil demand for 2024, indicating continued robustness in near-term oil consumption despite the recent COP28 agreement to transition away from fossil fuels. The IEA, representing industrialized countries, forecasts a 1.1 million barrels per day (bpd) increase in global consumption for 2024, up by 130,000 bpd from its previous estimate.
The upward revision is attributed to an improved outlook for the United States and lower oil prices. The IEA notes a somewhat improved GDP outlook, especially in the U.S., where a “soft landing” is becoming visible. Falling oil prices are identified as an additional factor boosting oil consumption, according to Reuters.
However, there remains a notable disparity between the IEA and OPEC regarding 2024 demand prospects. The two entities have been at odds in recent years over issues such as long-term demand and the necessity for investments in new supplies.
Despite the positive outlook for 2024, the IEA has reduced its global demand growth forecast for the current quarter by nearly 400,000 bpd to 1.93 million bpd due to a deteriorating economic outlook. The adjustments are concentrated in Europe, Russia, and the Middle East, with higher interest rates impacting the real economy, and petrochemical activity shifting towards China.
Oil prices have experienced a decline to a six-month low, reaching around $72 a barrel this week, even after OPEC+ announced new production cuts for the first quarter of 2024 on November 30. Following the release of the IEA report, crude oil prices rebounded by more than 3%, trading near $77.
The IEA’s projections underscore the ongoing challenges in balancing the transition to cleaner energy sources with the current demand for oil, emphasizing the complex interplay of economic factors and global energy dynamics.