Oil-Demand Growth Slowdown Marks Return to Prepandemic Trends, IEA Says -- Update
January 18 2024 - 3:46AM
Dow Jones News
By Giulia Petroni
Global oil-demand growth slowed significantly at the end of last
year and is expected to weaken further, marking a return to
prepandemic trends, according to the International Energy
Agency.
The Paris-based organization said Thursday in its monthly report
that growth is projected to ease to 1.2 million barrels a day in
2024 from 2.3 million barrels a day last year, taking total demand
to an average of 103 million barrels a day. Demand growth for 2024
was previously estimated at 1.1 million barrels a day.
In the fourth quarter of last year, growth slowed to 1.7 million
barrels a day from 2.8 million barrels a day in the third quarter,
reflecting slowing travel demand in China after a post-pandemic
boom, the IEA said.
China is still set to account for almost 60% of global demand
growth this year, boosted by the expansion of the petrochemical
sector, the agency said.
"The gains come predominantly at the expense of gasoline and
jet/kerosene, as 2023's post-pandemic release of pent-up Asian
travel demand recedes, efficiency standards continue to tighten and
electric vehicle sales rise," it said.
The Organization of the Petroleum Exporting Countries on
Wednesday left its expectations for this year's global oil-demand
growth unchanged at 2.2 million barrels a day, and said it expects
demand to grow by 1.8 million barrels a day in 2025, a level still
considered elevated by market watchers.
Meanwhile, global economic growth is expected to slow this year,
despite anticipated interest-rate cuts from central banks, the IEA
said, as business activity and consumer spending suffers the impact
of rate hikes in 2022 and 2023.
"Even if the now-mainstream view of a soft landing materializes,
2024 looks set to be a year of subdued global economic growth,
weighed down by the lagged impact of monetary tightening and a
squeeze in bank lending," it said.
Record supply from the U.S., Brazil and Guyana, along with
production increases from countries outside of OPEC+, are estimated
to lift world oil supply by 1.5 million barrels a day to an average
of 103.5 million barrels a day in 2024, according to the
organization.
Russian crude exports rose by 500,000 barrels a day in December
to a nine-month high of 7.8 million barrels a day, but export
revenue slumped to $14.4 billion as Russian oil price discounts
increased and benchmark oil prices fell.
The IEA's latest report came amid a sharp downturn in oil
prices, with crude down over 20% from its late-September high
despite the Israel-Hamas conflict and production cuts from OPEC.
Brent crude, the international benchmark, trades at around $78 a
barrel after briefly touching $80 last week. WTI, the U.S. oil
gauge, is around $73 a barrel.
Oil futures have recovered by around $4 a barrel from their
mid-December lows, the IEA said, as escalating tensions in the Red
Sea due to a string of attacks on commercial ships by Yemen's
Houthi rebels fueled fears of supply disruptions.
"Rising geopolitical tensions in the Middle East, which accounts
for one-third of the world's seaborne oil trade, has markets on
edge at the start of 2024," the agency said.
Production of oil and liquefied natural gas hasn't been directly
hurt by the attacks, but the risk of disruptions is still high,
particularly for oil flows transiting via the Suez canal, according
to the IEA. Meanwhile, rerouting vessels toward Southern Africa's
Cape of Good Hope--the main alternative shipping lane--adds
pressure to global supply chains and increases freight and
insurance costs.
But excluding significant disruptions to flows, the IEA said the
market looks well supplied this year, as higher-than-expected
production from countries outside of OPEC+ is set to outpace
oil-demand growth.
"While OPEC+ supply management policies may tip the oil market
into a small deficit at the start of the year, strong growth from
non-OPEC+ producers could lead to a substantial surplus if the
OPEC+ group's extra voluntary cuts are unwound in 2Q24," the agency
said.
Write to Giulia Petroni at giulia.petroni@wsj.com
(END) Dow Jones Newswires
January 18, 2024 04:31 ET (09:31 GMT)
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