By Adedapo Adesanya
The International Energy Agency (IEA) has said demand growth for oil next year will be slower than previously forecast.
The Paris-based agency said this would be caused by lacklustre macroeconomic conditions, a post-pandemic recovery running out of steam and increased adoption of electric vehicles.
Its August 2023 monthly report on Friday said the growth is forecast to slow to 1 million barrels per day in 2024, down by 150,000 barrels per day from its previous forecast.
“The global economic outlook remains challenging in the face of soaring interest rates and tighter bank credit, squeezing businesses that are already having to cope with sluggish manufacturing and trade,” the IEA said.
It also noted in the report that world fuel use averaged 103 million barrels a day for the first time in June and may soar even higher in August.
In 2023, global oil demand is set to expand by 2.2 million barrels per day, buoyed by summer air travel, increased oil use in power generation, and surging Chinese petrochemical activity.
Demand is forecast to average 102.2 million barrels per day this year, with China accounting for more than 70 per cent of growth, despite concerns about the economic health of the world’s top oil importer.
The IEA said world markets are tightening, leaving oil inventories in developed nations about 115 million barrels below their five-year average, adding that global stockpiles are set to deplete by a hefty 1.7 million barrels a day in the second half of the year.
On its part, the Organisation of the Petroleum Exporting Countries (OPEC), in its monthly forecast released on Thursday, reiterated its annual oil demand forecasts, expecting a rise of 2.25 million barrels per day in 2024, compared with a growth of 2.44 million barrels per day in 2023.
On the supply side, output has slowed considerably in recent months, spearheaded by voluntary reductions from Saudi Arabia.
OPEC and its allies, together known as OPEC+, began limiting supplies in late 2022 to bolster the market and, in June, extended supply curbs into 2024.
If current targets by OPEC+ are maintained, oil inventories could draw by 2.2 million barrels per day in the third quarter and 1.2 million barrels per day in the fourth quarter, potentially fuelling another hike in prices, the IEA predicted on Friday.