IEA raises oil demand outlook further on Red Sea tensions

London — The International Energy Agency (IEA) on Thursday raised its view on 2024 oil demand growth for a fourth time since November as Houthi attacks disrupt Red Sea shipping, though it remains far less bullish than producer group Opec.

Opec and the IEA, which represents industrialised countries, have clashed in recent years over issues such as the long-term outlook for crude oil and the need for investment in new supply.

World oil demand will rise by 1.3-million barrels a day in 2024, the IEA said in its latest report, up 110,000 bbl/day from last month. It forecast a slight deficit this year after Opec+ members extended cuts, from a surplus previously.

Brent crude oil rose as much as 80c a barrel towards $85 after the IEA report was published, touching its highest since November.

“Quite a bullish report, with upward revisions on demand growth, and lower supply growth estimates,” said UBS analyst Giovanni Staunovo.

The IEA had initially forecast 2024 demand growth of 860,000 bbl/day in June. Demand rose by 2.3-million bbl/day last year.

“The slowdown in growth, already apparent in recent data, means that oil consumption reverts towards its historical trend after several years of volatility from the post-pandemic rebound,” the IEA said.

Opec on Tuesday kept its demand growth forecast unchanged at 2.25-million bbl/day, meaning the views of the cartel and IEA remain nearly 1-million bbl/day apart, or almost 1% of daily world demand.

Dovish signals from central banks indicated a path out of economic doldrums, the IEA said, but subdued economic data in China remains a concern.

Disruptions to shipping in the Red Sea region have forced more trade on to the longer route around the Cape of Good Hope, pushing up the number of barrels at sea to nearly 1.9-billion at the end of February, the IEA said.

Longer routes boosted fuel demand and the loading of ships with fuel, or bunkering, in Singapore reached all-time highs.

Economic headwinds

The IEA still believes the cloudy economic outlook will weigh on demand even as the challenges to shipping provide a short-term boost.

Growth will continue to be heavily skewed towards non-OECD countries, even as China’s dominance gradually fades, the IEA said. It expects China’s demand growth to slow to 620,000 bbl/day from 1.7-million bbl/day in 2023.

On the supply side, the IEA said growth from non-Opec+ countries would continue to significantly eclipse oil demand expansion in 2024, though extended cuts by some cartel members had tightened the balance.

Earlier this month some Opec+ members extended voluntary cuts made in the first quarter until the end of June. The IEA said it was treating those cuts as being in place for the whole year, unwinding them only once Opec+ confirms the move.

“On that basis, our balance for the year shifts from a surplus to a slight deficit, but oil tanks may get some relief as the massive volumes of oil on water reach their final destination,” the agency said.

Reuters