IEA trims 2023 oil demand forecast for first time this year

"Persistent macroeconomic headwinds" has prompted the International Energy Agency (IEA) to reduce its 2023 oil demand growth forecast by 220,000 b/d from its previous forecast.

PHOTO: Getty Images

The downgrade was mostly attributed to "anaemic" OECD demand “amid a grinding slowdown in industrial activity” and a drop in African oil imports following a fuel subsidy removal.

African oil producers Nigeria, Angola and Senegal removed fossil fuel subsidies earlier this month to reduce their debt burdens caused by rising borrowing costs and high fuel prices. Nigeria and Angola are also members of the OPEC coalition.

The energy agency has now projected global oil demand to climb to 2.2 million b/d to reach 102.1 million b/d this year. This is a downward revision from its earlier forecast of 2.4 million b/d.

IEA has also changed its forecast for global oil demand in 2024 to 1.1 million b/d, a slight upward revision of 240,000 b/d from last month's forecast. However, the revised forecast is lower than 2023 levels.

According to IEA, a combination of weaker economic growth and vehicle electrification drive will weigh on demand over the next year.

"Amid an overall slackening in oil demand growth, China’s widely anticipated reopening has so far failed to extend beyond travel and services, with its economic recovery losing steam after the bounce earlier in the year," IEA explained in the July Oil Market Report.

In contrast, the energy market watchdog expects global supply growth to increase with non-OPEC producers leading the way. It raised its 2023 and 2024 supply growth forecasts by 200,000 b/d from last month to 1.6 million b/d and 1.2 million b/d, respectively.

The global oil supply is now estimated to reach 101.5 million b/d this year and 102.8 million b/d next year.

By Konica Bhatt

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