The high-stakes spat over how much oil the world really needs

The Organization of the Petroleum Exporting Countries and the International Energy Agency don’t see eye to eye on much. The latter was basically founded as an anti-OPEC 50 years ago to represent energy consumers a year after that cartel’s oil embargo quadrupled global crude prices. But now the gulf between their forecasts of how much oil the world will need in 2024 is oddly wide, especially for this late in the year.

The IEA thinks an additional 900,000 barrels of oil a day will be needed by consumers in 2024. OPEC is far more bullish and expects two million extra barrels will be required.

It isn’t unusual for there to be a gap between the two organizations’ annual demand estimates when they are first released. But as economic data rolls in throughout the year, their forecasts have tended to converge as one side or the other concedes it has been too optimistic or pessimistic.

Other than modest adjustments, that hasn’t happened in 2024. Stripping out 2020 to 2022, when pandemic lockdowns made it especially hard to forecast oil demand, the two organizations’ estimates have never been more than 350,000 barrels apart by September any year since 2010.

The main sticking point seems to be how demand will evolve in China over the next three months. OPEC thinks China will need 650,000 extra barrels a day in 2024, while the IEA has penciled in less than a third as much. The country consumed 315,000 additional barrels in the first half of the year, but demand has been shrinking year-over-year for four consecutive months. This suggests it would take an extraordinary economic boom for the last few months of the year to hit OPEC’s punchy target.

Stimulus from China’s central bank announced on Tuesday might help, but the recent slump looks structural as well as cyclical. In July, sales of electric vehicles and hybrids overtook those of internal-combustion engines there for the first time, and industrial trucks in the country increasingly run on liquefied natural gas rather than diesel. These shifts on China’s roads are important for oil markets. Chinese road-fuel demand accounted for about 15% of total oil-demand growth between 1994 and 2024, according to S&P Global Commodity Insights.

The two organizations are also more than 60,000 barrels apart on what India will need and over 100,000 barrels apart on demand estimates for the Middle East. True, this may be because the region is becoming harder to read as oil-producing countries keep their cards close to their vest. Iran, the United Arab Emirates and Iraq all stopped reporting demand data to the JODI Oil World Database in recent years.

OPEC officials have made scathing remarks about the IEA’s views on the oil market. Saudi Arabia’s energy minister called the IEA’s 2021 net zero road map “a sequel of [the] La La Land movie." And the cartel has said the Paris agency’s forecast that oil demand will peak by 2030 isn’t “fact-based." The IEA has also been getting it from critics in the U.S. In March, Republican lawmakers sent a letter to the agency accusing it of becoming a “cheerleader" for the shift away from fossil fuels.

But this looks like a case of shooting the messenger. An analysis by Arjun Murti, partner at energy research firm Veriten, shows that since 2016 but excluding 2020, the IEA has a slightly better record than OPEC at accurately forecasting oil demand. Most independent forecasters including S&P Global Commodities Insights are closer to the IEA’s forecast than OPEC’s this year. Even Saudi’s state-owned oil company Aramco only sees a need for 1.5 million additional barrels a day in 2024.

If OPEC believed its own numbers, it would surely put more oil in the market. Instead, the producer group recently delayed plans to raise oil output for at least another two months due to weak global demand. Making a final call about whose prediction is most accurate won’t be straightforward, though. Tallying oil barrels can take up to two years as data collection in some non-OECD countries is so spotty.

Getting it right one year doesn’t necessarily mean the IEA’s longer-term predictions are on track, though. The agency thinks global oil demand will peak around 2030—a controversial view that will continue to draw the ire of traditional oil producers. But this year at least, OPEC is the one indulging in wishful thinking.

Write to Carol Ryan at carol.ryan@wsj.com