IEA’s 4th Forecast Hike Amid Oil Surge

Quick Look

• The International Energy Agency (IEA) increases its 2024 oil demand growth forecast for the fourth time since November due to Red Sea shipping disruptions caused by Houthi attacks.
• Despite the upward revision, the IEA’s forecast remains significantly less optimistic than that of the Organization of the Petroleum Exporting Countries (OPEC), with nearly a 1 million bpd gap.
• Oil prices surged following the IEA report, with Brent crude reaching its highest since November.

The International Energy Agency (IEA) recently revised its 2024 oil demand growth estimate upwards, marking the fourth adjustment since November. This revision comes in the wake of increased disruptions to Red Sea shipping, primarily due to Houthi attacks. Despite this, the IEA’s stance on oil demand growth remains markedly less bullish compared to the optimistic forecasts by OPEC. The ongoing disparities between the IEA and OPEC are not new, reflecting long-standing disagreements over the long-term demand outlook and the necessity for new oil supply investments.

Analyzing the Revised Forecast and Market Reactions

In its latest assessment, the IEA anticipates world oil demand will rise by 1.3 million barrels per day (bpd) in 2024, an upward revision of 110,000 bpd from previous projections. This forecast anticipates a slight supply deficit following the extension of cuts by OPEC+ members, a shift from earlier surplus predictions. The report’s release spurred a notable increase in oil prices, with Brent crude peaking at its highest level since the preceding November. Analysts, including UBS’s Giovanni Staunovo, described the IEA’s report as “quite bullish,” noting significant revisions in demand growth and reduced supply growth estimates.

The Path Ahead Amid Economic and Geopolitical Challenges

Despite the positive revisions, the IEA report underscores several underlying challenges. The agency acknowledges the dampening effect of a murky economic landscape on oil demand, notwithstanding a temporary uplift from shipping disruptions. These disruptions, notably in the Red Sea, have necessitated longer trade routes, such as the Cape of Good Hope, inflating the volume of barrels at sea. Additionally, the report highlights the pivotal role of non-OECD countries in driving future growth, albeit with a gradual decline in China’s demand growth dominance. On the supply side, growth from non-OPEC+ countries is expected to outstrip demand expansion in 2024, despite recent production cuts by some OPEC+ members aiming to tighten the market balance.

While the IEA has adjusted its 2024 oil demand growth forecast upward for the fourth time, reflecting immediate concerns like Red Sea shipping disruptions, its outlook remains significantly less bullish than OPEC’s. This ongoing divergence underscores the complex economic, geopolitical, and market dynamics shaping the global oil landscape.