IEA slashes Q4 oil demand growth estimate on global economic slowdown

The International Energy Agency on Dec. 14 slashed its global oil demand growth forecast for the final quarter of 2023 by 400,000 b/d, citing further weakening of the macroeconomic climate and the growing impact of electric transportation.

In its latest monthly oil market report, the IEA said world oil demand is now on track to rise 2.3 million b/d to 101.7 million b/d in 2023, down from a previous forecast of 102 million b/d last month. The biggest change was driven by slower than expected demand growth in Europe, Russia and the Middle East, with global oil demand growth set slow drastically from 2.8 million b/d year on year in Q3 to 1.9 million b/d in Q4, the IEA said.

"The slowdown is set to continue in 2024, with global gains halving to 1.1 million b/d, as GDP growth stays below trend in major economies. Efficiency improvements and a booming electric vehicle fleet also drag on demand," the IEA said.

As a result, world oil demand growth in 2023 has been reduced by 90,000 b/d, to 2.3 million b/d, the IEA said, with China accounting for 80% of this year's global rise. For 2024, the IEA trimmed its demand forecast by almost 100,000 b/d to 102.8 million b/d with oil consumption growth now projected to halve to 1.1 million b/d, 130,000 b/d higher than last month's forecast "with demand baselines normalizing as COVID-related distortions fade."

The latest demand revisions come just a month after the IEA raised its estimates for oil demand and supply growth in 2023 by 100,000 b/d and 200,000 b/d respectively, citing Chinese demand on the one hand and "outperforming" production in the US and Brazil on the other. It also follows OPEC's own oil market report which forecast that global oil demand growth would continue to outpace increases in supply from non-OPEC producers.

Analysts at S&P Global Commodity Insights forecast oil demand growth of 1.9 million b/d in 2023, and 1.5 million b/d in 2024.

Supply strength

On the supply side, the IEA noted that the pace of US production growth "continues to defy expectations," with record output reaching the 20 million b/d mark helped by improved shale oil productivity.

Overall output growth of 1.8 million b/d will push global supply in 2023 to 101.9 million b/d, its highest ever, the IEA estimated, noting that US oil output is expected to account for two-thirds of the 2.2 million b/d non-OPEC+ growth this year.

"Higher-than-forecast US supplies, along with a stronger performance from Brazil and surging Iranian production -- combined with slower demand -- have prevented a tighter oil market from materializing in Q4 2023 as previously expected," the IEA said

Supported by strong output growth in the US, Brazil and Guyana, the IEA raised its non-OPEC oil supply estimate for 2024 to 69 million b/d, 100,000 b/d higher than previously.

Assuming OPEC+ unwinds its output cuts in 2024, global output is projected to grow by 1.2 million b/d next year, the IEA said, lifting supply to a new record of 103.2 million b/d.

After OPEC+ members announced Q1 2024 oil supply curbs totaling 2.2 million b/d, the IEA said it now estimates that OPEC+ supply decline will cut the producer group's market share to 51% in 2023 -- the lowest since the coalition's was created in 2016.

On stocks, the IEA said global oil inventories declined by 19.6 million barrels in October to 2.81 billion barrels, in line with seasonal trends. While crude oil inventories were largely unchanged, oil product stocks fell for the first time in four months.