IEA cuts 2023 oil demand forecast on macroeconomic concerns

The agency expects oil demand growth to halve to 1.1 million bpd in 2024

A crude oil tanker anchored at the Kozmino terminal in Nakhodka Bay, near the port city of Nakhodka, Russia. Reuters

The International Energy Agency has lowered its 2023 oil demand growth forecast for the first time this year, citing macroeconomic headwinds and a deepening manufacturing slump.

World oil demand is now expected to grow by 2.2 million barrels per day this year, lower than a previous forecast of 2.4 million bpd growth, the Paris-based agency said in its monthly oil market report on Thursday.

China, the world’s second-largest economy and biggest importer of crude, will make up 70 per cent of the total consumption, the IEA said.

“World oil demand is coming under pressure from the challenging economic environment, not least because of the dramatic tightening of monetary policy in many advanced and developing countries over the past 12 months,” the IEA said.

“While Chinese demand growth continues to surprise to the upside, a surge in domestic petrochemical activity has undermined steam cracker margins and activity elsewhere,” the agency said.

“Demand in the OECD [Organisation for Economic Co-operation and Development], and Europe in particular, is languishing amid a grinding slowdown in industrial activity.”

Global oil supply, which rose to 101.8 million bpd in June, is expected to fall sharply this month as Saudi Arabia’s voluntary output cut of 1 million bpd comes into effect, the IEA said.

The agency expects global production to increase by 1.6 million bpd to 101.5 million bpd this year.

Meanwhile, oil demand growth will halve to 1.1 million bpd in 2024 amid higher levels of electrification in the transport sector and energy efficiency, the IEA said.

Russian oil exports fell 600,000 bpd to 7.3 million bpd last month, the lowest since March 2021, the report said.

Moscow’s estimated export revenues plunged by $1.5 billion to $11.8 billion – nearly half the levels of a year ago, the IEA said.

Russia, which has pledged a further output cut of 500,000 bpd from August, may hold production steady as domestic oil demand rises seasonally, the agency said.

The Opec+ alliance of 23 oil-producing countries will keep its current production curbs in place until the end of 2024.

The group has total production curbs of 3.66 million bpd, or about 3.7 per cent of global demand, in place, including a 2 million bpd reduction agreed last year and voluntary cuts of 1.66 million bpd announced in April.

Brent, the benchmark for two thirds of the world’s oil, was trading 0.05 per cent higher at $80.17 a barrel at 5:30pm UAE time on Thursday.

West Texas Intermediate, the gauge that tracks US crude, was down 0.07 per cent at $75.70 a barrel.

Earlier, Opec raised its oil demand growth forecast for this year based on higher fuel consumption in China.

The group now expects global oil demand to grow by 2.4 million barrels per day, up from a previous estimate of 2.3 million bpd.