Global oil markets will be in a supply deficit this year instead of the surplus previously predicted as Opec+ supply cuts are expected to continue into the second half of the year, according to the International Energy Agency.
The agency's projection is based on the assumption that the voluntary cuts by Opec+ will remain in effect through 2024 unless there is confirmation from the producers' alliance indicating otherwise, the agency said in its latest oil market report on Thursday.
“On that basis, our balance for the year shifts from a surplus to a slight deficit,” the agency said.
Global oil supply this year is projected to increase by 800,000 barrels per day to 102.9 million bpd, while demand is expected to average a record 103.2 million bpd this year.
Oil prices gained on Thursday as the agency’s report hinted at tighter crude markets this year.
Brent, the benchmark for two thirds of the world’s oil, was trading 0.57 per cent higher at $84.51 a barrel at 3.00pm UAE time. West Texas Intermediate, the gauge that tracks US crude, was up 0.78 per cent at $80.34 a barrel.
Earlier this month, crucial Opec+ members, including Saudi Arabia, the UAE, and Kuwait, extended voluntary supply cuts of 2.2 million bpd into the second quarter to stabilise the market. The group will next meet in Vienna on June 1.
The agency also raised its annual oil demand growth forecast, citing higher-than-expected crude consumption of 1.7 million bpd in the first quarter.
It expects oil demand to grow by 1.3 million bpd in 2024, up from its previous estimate of about 1.2 million bpd, but significantly lower than the expansion of 2.3 million bpd seen last year.
The projection reflects slowing fuel demand in China as well as efficiency gains and rising adoption of electric vehicles worldwide, the agency said.
The forecast has also narrowed the gap to Opec’s estimate of 2.2 million bpd growth this year. Opec has taken a more positive view of the oil markets and expects higher economic growth in the US and India to drive consumption.
On Wednesday, Opec stuck to its oil demand projections for 2024 and 2025 and raised its forecast for economic growth this year.
Meanwhile, the US Energy Information Administration, the statistical arm of the Department of Energy, expects global oil demand to grow by 1.4 million bpd in 2024 and 2025.
Higher bunker fuel use and surging US ethane demand were behind the increase in estimate for 2024, the IEA said.
“Trade flow disruptions also boosted bunker fuel use. Longer shipping routes and faster vessel speeds saw Singapore bunkering reach all-time highs,” the agency said.
“That, along with surging US ethane demand for its petrochemical sector underpins a slight upwards revision to our global oil demand expectations,” it added.
China’s oil demand growth is set to fall by 63 per cent from 2023 to 620,000 bpd this year, the IEA said.
The rapid decline is due to a “challenging” economic environment and slower expansion in the country’s petrochemical sector, it added.
China’s crude imports hit a record high last year as the country’s economy experienced a post-pandemic recovery.
However, manufacturing activity in the world’s second-largest economy has significantly slowed in recent quarters amid weak consumer spending and a property market downturn.
On the supply side, Iran, which was the world’s second-largest source of supply growth after the US in 2023, is expected to increase production by an additional 280,000 bpd this year, the IEA said.
