BNR – The International Energy Agency (IEA) has forecasted that OPEC+ supply reductions might lead to a decline in oil inventories throughout 2023. This may drive prices to even higher levels. The IEA’s analysis suggests that economic challenges could eventually limit global demand growth in 2024.
Driven by OPEC+ production cuts and an uptick in worldwide demand, oil prices have experienced an upsurge. Brent crude recently achieved a peak of over $88 per barrel, reaching its highest point since January.
OPEC+ Supply Reductions Could Deplete Oil Inventories
According to the IEA’s projection, if the current OPEC+ production targets are maintained, oil inventories could deplete by 2.2mln barrels per day (bpd) in the third quarter. Furthermore, they could deplete by 1.2mln bpd in the fourth quarter. The report underscores the possibility of this trend driving oil prices even higher.
OPEC+ nations initially began implementing supply restrictions in late 2022 to stabilise the market, extending these measures into 2024. Notably, the global oil supply witnessed a significant decline of 910,000 bpd in July, partly attributed to a substantial reduction in Saudi output. However, Russian oil exports remained steady at around 7.3mln bpd during the same period.
Limitations of Global Oil Demand Growth
Looking ahead, the IEA predicts a deceleration in demand growth in 2024, estimating it to slow down to 1mln bpd. This projection factors in a combination of subdued macroeconomic conditions, a post-pandemic recovery and the increasing utilisation of electric vehicles.
The IEA’s demand growth outlook is slightly lower by 150,000 bpd compared to the previous month. This contrasts with OPEC’s projection, which maintains that oil demand will experience a robust increase of 2.25mln bpd in 2024.
Amidst soaring interest rates and tightening bank credit, the global economic landscape remains challenging, as per the IEA’s assessment.
For the current year, the IEA and OPEC forecasts are more aligned. The IEA predicts a demand expansion of 2.2mln bpd in 2023, driven by factors such as summer air travel, heightened oil consumption in power generation, and robust Chinese petrochemical activity. In contrast, OPEC foresees a slightly higher rise of 2.44mln bpd.
The IEA’s overall demand projection for 2023 is an average of 102.2mln bpd, with China contributing over 70 per cent. This is despite some concerns about the economic well-being of the world’s top oil importer.