In terms of predictions for this year’s global oil demand outlook, the International Energy Agency (IEA) widened the difference with oil producer organisation OPEC on Wednesday by lowering its projection for oil demand growth in 2024.

The split between OPEC and the IEA, which represents developed nations, gives conflicting messages about the strength of the oil market in 2024 and, in the long run, about how quickly the world will switch to greener fuels.

The Paris-based IEA predicted in a monthly report that global oil consumption would rise by 1.1 million barrels per day (bpd) this year, down 140,000 bpd from the previous estimate, primarily due to sluggish demand in rich OECD countries.

The IEA attributed the lower 2024 projection to weak industrial activity and mild winters that reduced the need for petrol, especially in Europe where a falling percentage of diesel vehicles was already reducing consumption.

The report noted that the OECD fall was slightly offset by solid non-OECD demand led by China. “Combined with weak diesel deliveries in the United States at the start of the year, this was enough to tip OECD oil demand in the first quarter back into contraction,” the agency said.

The Organisation of the Petroleum Exporting Countries maintained on Tuesday that it expects the global oil demand to increase by 2.25 million barrels per day by 2024. 1% of global demand is represented by the 1.15 million bpd differential.

Earlier this year, a Reuters study revealed that the 1.03 million bpd disparity in February was the largest since at least 2008. This indicates that the gap between the IEA and OPEC is now considerably bigger.

In terms of their predictions for 2025, the two are closer. On Wednesday, the IEA revised up its forecast for demand growth to 1.2 million bpd. OPEC did not alter its 1.85 million barrels per day prediction.

Regarding the future for the world economy, OPEC expressed optimism on Tuesday, while the IEA was more circumspect on Wednesday.

Despite the fact that the prognosis for the world’s demand economy has improved since the end of the previous year, investors have lowered their expectations for interest rate reduction by central banks due to persistent inflation in the main Western nations, according to the IEA.

The prolonged period of high borrowing prices in the US and Europe has slowed economic development and reduced demand for oil.

When OPEC+ (OPEC and its allies led by Russia) meets in June, it will make decisions about whether to extend voluntary oil output cuts into the second half of the year based on the state of the world’s oil demand.

The IEA forecast that supply will increase outside of OPEC in 2019 and that overall, the market will appear more balanced.

The agency predicted that even if OPEC+ voluntary production curbs were to continue, non-OPEC+ output growth would drive a 1.8 million barrel rise in global oil supply by 2025, compared with this year’s 580,000 barrel increase.

Regarding the medium- and long-term demand picture, the IEA and OPEC disagree.

By 2030, the IEA predicts that oil demand will peak. OPEC has not predicted a peak in oil consumption and believes it will continue to rise over the next 20 years.

(Adapted from MoneyControl.com)

Categories: Economy & Finance, Geopolitics, Strategy, Sustainability