Oil extends losses after IEA forecasts slower demand growth this year

Energy agency expects global supply to increase to a record 13.8 million barrels per day in 2024

The International Energy Agency expects crude demand to grow by 1.22 million barrels per day this year, compared with 2.3 million bpd in 2023. Bloomberg
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Oil prices extended their losses on Thursday after the International Energy Agency said that global oil demand will grow at a slower pace this year.

Brent, the benchmark for two thirds of the world’s oil, was trading 0.75 per cent lower at $80.99 a barrel at 4.09pm UAE time. West Texas Intermediate, the gauge that tracks US crude, was down 0.81 per cent at $76.02 a barrel.

On Wednesday, Brent settled 1.41 per cent lower at $81.60 a barrel. WTI closed down 1.58 per cent at $76.64.

The International Energy Agency slashed its 2024 oil demand growth forecast and said that global oil consumption was “losing momentum”.

The agency expects crude demand to grow by 1.22 million barrels per day this year, compared with 2.3 million bpd in 2023, it said in its monthly oil market report.

It had previously forecast 2024 demand growth of 1.24 million bpd.

“The expansive post-pandemic growth phase in global oil demand has largely run its course,” the agency said.

The annual increase in demand for oil fell to 1.8 million bpd in the fourth quarter, from 2.8 million bpd in the previous quarter, the IEA said.

Meanwhile, world oil supply is set to increase by 1.7 million bpd to a record 13.8 million bpd this year, with non-Opec+ making up for 95 per cent of the incremental barrels, the agency said.

Despite Opec+ production cuts, the IEA expects a “slight” build in crude inventories in the current quarter.

“From the [second quarter] onwards, continuation of this strength [in production] could leave Opec+ pumping above requirements … if extra voluntary cuts are unwound in the second quarter,” the agency added.

In December, the Opec+ group of producers agreed to voluntary output cuts of about 2.2 million bpd for the first quarter of this year, on top of 3.66 million bpd agreed upon earlier.

The Israel-Gaza conflict and its escalation into the Red Sea, a crucial route for the oil trade, has had a limited impact on prices so far.

Brent has gained by 5 per cent since the beginning of the year amid persistent concerns about demand and growing crude supply.

“Given heightened geopolitical risks and low global oil inventories, a modest surplus may help contain market volatility,” the IEA said.

Meanwhile, US crude inventories, an indicator of fuel demand, increased by 12 million barrels in the week that ended on February 9, according to the US Energy Information Administration.

Analysts polled by Reuters were expecting a rise of 2.6 million barrels.

“There's tremendous uncertainty around the Middle East, the economy, and interest rates which is generating these large moves [in oil prices],” said Craig Erlam, senior market analyst at Oanda.

“There has been more of an upside bias of late but broadly speaking the price remains at reasonable levels that won't be a concern from an inflationary standpoint.”

Updated: February 15, 2024, 2:22 PM