The IEA projects a 102 million barrels per day oil demand growth in 2023 and 102.9 million barrels per day in 2024. This is according to the agency’s oil market report released November 14.
The IEA report highlighted that global oil demand is surpassing initial expectations.
Their revised forecast for 2023 projects a growth of 2.4 million barrels per day (mb/d).
This adjustment is due to the resilience shown in US oil deliveries, which were stronger than earlier data suggested.
Additionally, Chinese oil demand soared in September, reaching a new peak of over 17 mb/d, primarily driven by a thriving petrochemical industry. However, this surge in demand has negatively impacted petrochemical producers in other regions, particularly in Europe, Asia, and Oceania.
Despite a growth rate almost two-thirds lower than the current year, global oil demand is anticipated to reach a record annual high of 102.9 mb/d in 2024.
Furthermore, the report mentioned that world oil supply growth is also exceeding initial projections.
Concerns about the Israeli-Hamas conflict escalating into a wider regional crisis, disrupting oil supply flows, have not materialized so far.
Unless significant unforeseen disruptions occur, global oil supply is steadily increasing, with October’s output rising by 320 thousand barrels per day compared to the previous month.
The IEA also noted that the market rally that pushed benchmark oil prices towards triple digits in September reversed sharply in October, despite continued tight crude supplies and an intensifying conflict in the Middle East. Note that as of Wednesday, November 15, Brent crude was $82.81 per barrel (7:20 AM, GMT+1).
Demand and supply dynamics
According to the IEA report, in early November, major oil exporters Saudi Arabia and Russia confirmed they would continue their extra voluntary output cuts until the end of 2023. These reductions are expected to maintain a substantial shortage in the oil market through year-end.
Note that the OPEC+ alliance, comprising both countries, is currently pumping 900 thousand barrels per day (kb/d) below the demand for their crude oil.
Meanwhile, in Q3/2023, IEA says that global crude oil inventories took a massive dip, plummeting by 140 million barrels to reach a new low.
This drop was primarily due to refineries increasing their activity before seasonal maintenance. However, the pace of demand growth is anticipated to slow down, potentially leading the market into a surplus as we head into 2024.
Presently, demand continues to outpace available supplies, especially with the onset of the Northern Hemisphere winter.
A balanced market – Vitol
During the Financial Times Asia Commodities Summit on Wednesday, November 2023, Giovanni Serio, the Global Head of Research at independent oil trader, Vitol, said that the global oil market is currently fairly balanced.
Reuters reports that Serio said oil demand globally has exceeded 2019 levels and is expected to continue growing as oil intensity – the volume of oil consumed per unit of GDP – for most economies has returned to pre-pandemic levels except in the United States.
He stated further that regarding supply in the oil market, there is a need to limit it, even with the implementation of extra reductions by significant oil producers like Saudi Arabia. This necessity remains despite relatively low investments in the oil sector in recent years.
He also highlighted that the production increase from non-OPEC countries has surpassed previous peaks and is still rising while noting that Nigeria’s oil output has notably exceeded expectations, contributing to the overall increase in global oil production.