Due to decreased gasoil consumption in several of the largest economies in the world, especially in Europe, and mild winter temperatures, the International Energy Agency lowered its prediction for growth in oil demand this year.
According to the Paris-based organisation, the growth in oil demand is currently estimated to be 1.1 million barrels per day, down from 1.2 million barrels per day in its most recent monthly report. It is still anticipated that 103.2 million barrels will be consumed daily on average.
The OECD countries’ oil demand shrank by 70,000 barrels per day on an annual basis in the first quarter, which resulted in slower-than-anticipated growth and the revision. Throughout the quarter, demand for gasoil in Europe decreased by 140,000 barrels per day, partly due to a decrease in the number of diesel vehicles on the continent.
“Global growth is becoming increasingly dependent on emerging economies as a result of the slump in the OECD and the relatively resilient non-OECD demand, which grew by 1.2 million barrels per day on average between 1Q and 2024,” the IEA stated.
The report released on Wednesday comes as crude prices, which were last seen in mid-March, are still trading in a range. The U.S. oil gauge CL.1, -0.13%, West Texas Intermediate, is currently trading at about $78 per barrel, while the international benchmark, Brent crude BRN00, -0.21%, is currently trading at about $82 per barrel.
Sticky inflation raises the possibility of higher-for-longer U.S. interest rates, which depresses sentiment because higher rates usually reduce oil demand and strengthen the dollar. Since the Middle East conflict hasn’t yet seriously disrupted oil supplies, traders are taking into account a lower geopolitical risk premium.
Although the estimates are relatively unchanged, the IEA increased its oil-demand growth forecast for the upcoming year from 1.1 million barrels per day to 1.2 million barrels per day. An average of 104.3 million barrels are required daily to meet the total demand.
The Paris-based organisation states that demand estimates are generally in line with the macroeconomic outlook, with global economic growth expected to be 2.9% this year and next, below the average for 2010–2019.
The agency stated that “despite the fact that the outlook for the global economy has improved since the end of last year as a soft-landing scenario has become the dominant view, investors have recently lowered their expectations for interest rate cuts by central banks due to stubbornly high inflation readings.”
The Organisation of the Petroleum Exporting Countries (OPEC) projects that global oil demand will rise by 2.2 million barrels per day this year and 1.8 million barrels per day the following year. The IEA’s oil-demand projections are still lower than theirs.
The estimated total oil supply for 2025 is still 104.5 million barrels per day, but it is now expected to average 102.7 million barrels per day this year, down from 102.9 million barrels per day last year. According to the IEA, lower Canadian output last month as a result of maintenance work and some production cuts by Russia in accordance with OPEC+ quotas hurt global supply.
According to the agency, non-OPEC+ nations will continue to dominate the world supply, with daily production growth of 1.4 million barrels anticipated this year and next. Prior to now, the IEA predicted growth of 1.6 million barrels per day through 2024. According to estimates, the United States will contribute 40% of non-OPEC+ growth in 2025 and 45% this year.
If the group continues its voluntary output cuts, OPEC+ production is expected to decrease by 840,000 barrels per day this year. If the cuts are maintained, however, production is expected to increase by 330,000 barrels per day in 2025.
As a result of a collapse in middle distillate cracks and lower throughput levels, as well as weaker-than-expected demand growth, global refinery margins eased globally in April, according to the IEA. Refinery output is predicted to increase by 1.8 million barrels per day in the second half of the year.
Because of stronger refinery runs in OECD countries in the first quarter and better-than-expected Russian crude runs in March, global refinery output is expected to rise to 83.4 million barrels per day this year, exceeding the IEA’s previous forecast.
According to the agency, Russian crude exports decreased by 450,000 barrels per day to 7.3 million barrels per day in April. The country’s commercial revenues also decreased, falling 6.5% to $17.2 billion from the previous month. Nonetheless, because higher prices more than offset lower volumes, crude export revenues stayed mostly unchanged.
