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IEA shifts forecast closer to Opec, but expects 2024 surplus

Oil rig Reuters
Kufpec has stakes in several producing fields on the Norwegian continental shelf, including Gina Krog and Sleipner Vest
  • Post-Covid rebound to weaken
  • 2023 demand above expectations
  • Chinese demand growing

The International Energy Agency expects the oil market to shift into surplus in 2024 – implying lower prices – on the back of slowing growth in demand.

The IEA, which largely represents Western oil consumer nations, said that this slowdown would be down to efficiency gains and a weakening in the post-Covid rebound.

A more bearish mood is justified by economic headwinds in OECD countries, with slim demand gains this year giving way to a contraction in 2024, according to the Paris-based agency.

However, world oil demand exceeded expectations this year, the IEA added. Growth in non-Opec countries has offset slower growth in larger economies.

The IEA has raised its forecast for 2023 oil demand growth to 2.4 million barrels per day (bpd) – moving it closer to Opec’s prediction. 

On Monday, Opec raised its oil demand growth figure to 2.5 million bpd.

Growth in China

“Opec sees very healthy Chinese crude imports and refinery activity and a sizeable decline in their oil inventories, approximately 3 million bpd,” Vijay Valecha, chief investment officer at Century Financial, told AGBI.

According to the IEA, Chinese oil demand rose to another high of 17.1 million bpd in September. China is set to account for 1.8 million bpd of the total 2.4 million bpd increase.

Last week the International Monetary Fund upgraded its projection for China’s 2023 economic growth to 5.4 percent.

Similarly, Opec said India’s crude imports were expected to pick up in the fourth quarter and reach a record high this year. 

In 2024, Opec expects world oil demand to grow by 2.2 million bpd. “The non-OECD is set to drive next year’s growth with China, the Middle East, other Asia and India contributing the most,” it said.

In September, the IEA forecast that global demand for oil, gas and coal would peak this decade, a view described as “dangerous” by Opec.

Benchmark oil prices rose towards triple digits in September. They fell sharply in October, however, despite continued tight crude supplies and an intensifying conflict in the Middle East, said the IEA.

Data and analytics company Kpler said Brent was trading at $83.50 on average this year and was remarkably stable, attributing this to Opec+ policy. 

On November 15, the benchmark was trading at $82.25 per barrel, while West Texas intermediate was at $77.85.

“Oil consumption is still up and doing well,” said Matt Stanley, energy expert at Kpler. “We see $80 being a support level for Brent that people will protect and then we see prices picking up in the second half next year, back up to the $85.”