Higher global oil supply set to satisfy demand increase, IEA says
Summary
Demand will be concentrated in China, Brazil and India, with the three major economies set to account for nearly 80% of global growth this year
Global oil demand is expected to grow at a significantly weaker pace this year, while soaring output from the Americas will help boost supply despite output curbs from OPEC and its allies, the International Energy Agency said.
The Paris-based organization on Thursday left its forecast for oil-demand growth this year unchanged at 1.2 million barrels a day, down from 2.3 million barrels a day in 2023 due to slower economic growth. Total demand is expected to average 103 million barrels a day.
“Global oil demand growth is losing momentum," it said in its monthly report. The slowdown was well under way last year, when demand growth fell to 1.8 million barrels a day in the fourth quarter from 2.8 million barrels a day in the third quarter, according to the agency. This year, growth is forecast to decelerate even further to 1.4 million barrels a day in the first quarter and 1 million barrels a day in the second quarter.
Demand will be concentrated in China, Brazil and India, with the three major economies set to account for nearly 80% of global growth this year—a return to trends in 2018-19, when close to 90% of the world’s gains were in these countries, the IEA said.
On Wednesday, the Organization of the Petroleum Exporting Countries reiterated that it anticipates global oil-demand growth at 2.2 million barrels a day this year and 1.8 million barrels a day the next.
Meanwhile, rising production from countries outside of the OPEC+ group is expected to help oil supply increase by 1.7 million barrels a day this year to an average of 103.8 million barrels a day, the IEA said. Supply was previously forecast at 103.5 million barrels a day.
In January, global oil supply posted a sharp decline of 1.4 million barrels a day compared with December levels, as an Arctic blast shut production in North America and OPEC and its allies deepened output cuts, according to the agency.
“While higher global oil supply this year, led by the United States, Brazil, Guyana and Canada, should more than eclipse the expected rise in world oil demand, a sharp decline in output in January set the year off to a difficult start," it said.
Despite the extension and deepening of OPEC+ supply curbs, the IEA anticipates a slight build in inventories in the first quarter, which could help contain market volatility driven by heightened geopolitical risks and broadly low global oil inventories.
Russian crude exports were broadly flat in January at around 7.7 million barrels a day, but commercial revenue rose by 1.4% compared with the previous month to $15.7 billion due to modest gains in product prices. The agency said recent attacks by Ukraine on Russian refineries have yet to affect product loadings, but the impact on trade flows could be substantial if repair works are prolonged.
The IEA’s latest report came after crude futures rose by around $5 a barrel in January, fueled by concerns over a widening conflict in the Middle East and disruptions to North American oil production.
“Global oil market balances tightened in January despite apparent demand weakness," the agency said. “An extreme Arctic freeze that swept through key oil producing regions in the United States and Canada prompted significant supply outages that coincided with fresh voluntary output curbs by some OPEC+ countries."
Brent crude, the international benchmark, currently trades around $81 a barrel, while WTI, the U.S. oil gauge, is around $76 a barrel.
Write to Giulia Petroni at giulia.petroni@wsj.com
