IEA Slashes Oil Demand Forecast: Electric Vehicles and Slowdown Put Brakes on Growth

The International Energy Agency (IEA) slashed the oil demand growth forecast for 2024 to 1.2 million barrels a day from the previous 1.3 million barrels a day.

As per the report of the Paris-based organization, global output is forecasted to rise by 770 kb/d to 102.9 mb/d in 2024.

World oil demand growth continues to lose momentum, with growth of 1.6 mb/d and 120 kb/d below the previous forecast in first-quarter FY24, due to exceptionally weak OECD deliveries.

In its latest monthly report, the IEA said it expects oil demand growth to decelerate further to 1.1 mb/d in 2025 as the post-COVID-19 rebound has run its course, and an expansion of the EV fleet is likely to weigh on oil demand.

In 2025, global oil supply is expected to increase by 1.6 mb/d to a new record of 104.5 mb/d as non-OPEC+ lead gains for a third straight year, rising by 1.4 mb/d.

The global refinery throughputs is anticipated to rise by 1 mb/d to 83.3 mb/d in 2024 (160 kb/d less than in last month's Report). This is due to lower Russian runs, unplanned outages in Europe and still-tepid Chinese activity.

Throughputs are projected to increase by 830 kb/d to 84.2 mb/d in 2025, as non-OECD growth of 1.1 mb/d more than offsets declines in the OECD.

As per the agency, ICE Brent crude futures hit a six-month high of $90/bbl in early April, with exchange net fund positions in Brent rising to their highest in a year amid increasing tensions in the Middle East, attacks on Russian refineries, and an extension of OPEC+ output cuts through June. 

The OPEC+ production is forecasted to expand by 1.6 mb/d, while OPEC+ supply is projected to fall 820 kb/d if voluntary cuts remain in place.

The IEA’s projections are significantly lower than the Organization of the Petroleum Exporting Countries, as the cartel forecasts global oil-demand growth of 2.2 million barrels a day this year and 1.8 million barrels a day the next, as per WSJ.

The IEA said, “Sustained output curbs by the OPEC+ alliance mean that non-OPEC+ producers, led by the Americas, will continue to drive world oil supply growth through 2025. OPEC+ market share has already slipped to all-time lows after the alliance removed close to 2 mb/d of supply from the market since the end of 2022, while non-OPEC+ ramped up by nearly the same amount.”

“Non-OECD countries dominate the outlook, with forecast demand set to increase by 1.3 mb/d in 2024 and 1.2 mb/d in 2025. By contrast, consumption in the OECD will decline by 60 kb/d in both years. China continues to lead the growth even as its share of the global increase slumps from 79% in 2023 to 45% in 2024 and 27% next year.”

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