On Wednesday, the International Energy Agency (IEA) reduced its forecast for 2024 oil demand growth, widening the gap with the Organization of the Petroleum Exporting Countries (OPEC) regarding global oil demand expectations for this year.
This disparity between the IEA, representing industrialized nations, and OPEC highlights differing perspectives on the strength of the oil market in 2024 and the longer-term pace of the global transition to cleaner energy.
The Paris-based IEA now predicts global oil demand will grow by 1.1 million barrels per day (bpd) in 2024, a reduction of 140,000 bpd from its previous forecast. The revision is largely attributed to weak demand in developed OECD nations, driven by sluggish industrial activity and a mild winter that reduced gasoil consumption in Europe, where the decline in diesel cars further dampened demand.
“Combined with weak diesel deliveries in the United States at the start of the year, this was enough to tip OECD oil demand in the first quarter back into contraction,” the IEA stated. However, it noted that resilient demand from non-OECD countries, particularly China, partially offset the OECD slump.
In contrast, OPEC maintained its forecast on Tuesday, expecting world oil demand to increase by 2.25 million bpd in 2024. The 1.15 million bpd discrepancy between the IEA and OPEC projections represents about 1 percent of global demand. This gap is now larger than it was earlier this year, when a Reuters analysis in February found a 1.03 million bpd difference, the widest since at least 2008.
For 2025, the two organizations are closer in their projections. The IEA slightly raised its demand growth estimate to 1.2 million bpd, while OPEC left its forecast unchanged at 1.85 million bpd.
Oil Demand in Focus
OPEC expressed optimism about the global economic outlook on Tuesday, whereas the IEA adopted a more cautious stance on Wednesday. The IEA acknowledged that while the global economic outlook has improved since late last year, persistent inflation in major Western economies has tempered investor expectations for central bank interest rate cuts. High borrowing costs in the United States and Europe continue to dampen economic growth and oil demand.
The state of global oil demand will play a crucial role in OPEC+’s decision-making on whether to extend voluntary oil output cuts into the second half of the year when it meets in June. OPEC+ includes OPEC and allies led by Russia.
Looking ahead to 2025, the IEA predicts a more balanced market with supply rising outside OPEC. Even if OPEC+ maintains its voluntary production cuts, global oil supply could increase by 1.8 million bpd in 2025, compared to a 580,000 bpd rise this year, primarily due to growth in non-OPEC+ output.
The IEA and OPEC also differ in their medium and long-term demand outlooks. The IEA anticipates that oil demand will peak by 2030, whereas OPEC projects that oil consumption will continue to rise for the next two decades and has not forecast a peak.