International Energy Agency raises estimate for oil demand growth

Global oil demand will continue to rise this year, but more slowly than last year. The main reasons are an economic slowdown in some countries and a gradual return to normal after the turbulent period caused by the COVID-19 pandemic. The International Energy Agency (IEA) said this today in its monthly report on the state of the market. However, amid ongoing attacks on ships in the Red Sea, it also raised its estimate for oil demand growth this year compared with last month's report.

The agency expects oil demand to rise by 1.3 million barrels per day this year, a full million less than last year's increase. At the same time, this is 110.000 barrels per day more than the IEA forecast in its February report. Overall, 102.9 million barrels of oil per day should reach the global market this year, 800,000 barrels per day more than last year.

The oil trade continues to be affected by attacks by Houthi rebels off the coast of Yemen, which are disrupting shipping in the Red Sea. This route is crucial for trade between Asia and Europe. Because of the attacks, which the Houthis say are linked to the war between Israel and the Palestinian radical group Hamas, ships are often forced to avoid the Red Sea and take a longer and, above all, more expensive route around the southern tip of Africa.

„(Growth) is returning to its historical trend after the extreme volatility of the pandemic years,“ said the agency, which is based in Paris and acts as an energy adviser to countries belonging to the Organisation for Economic Co-operation and Development (OECD).

„Slower global economic growth is another drag on oil consumption, as are improvements in vehicle efficiency and the expanding fleet of electric vehicles,“ the IEA added.

The central banks of major Western countries have been signaling for some time that an era of monetary policy easing is approaching. Lower interest rates, and therefore cheaper money, should theoretically support the global economy. However, according to the agency, the performance of China's economy is a cause for concern, as it is weaker than expected.

The agency also said that the volume of oil stored on ships had reached its second-highest level since the peak during the pandemic. Onshore oil stocks then fell for the seventh month in a row and are now at their lowest level since at least 2016.

The IEA's oil demand outlook is more cautious than that of the Organization of the Petroleum Exporting Countries (OPEC), which takes a more positive view of the global economic outlook. OPEC's projected oil demand growth for this year is almost one million barrels per day higher.