Macro

IEA Cuts Oil Demand Forecast, Record 103.2M Barrels Expected

IEA cuts global oil demand growth forecast to 1.1 million barrels a day amid economic slowdown and mild European weather.

By Mackenzie Crow

5/15, 04:19 EDT
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Key Takeaway

  • IEA cuts 2023 global oil demand growth forecast by 140,000 barrels a day due to economic slowdown and mild European weather.
  • Despite the cut, annual consumption is expected to hit a record 103.2 million barrels a day.
  • OPEC+ output curbs could deepen supply deficit in Q3, contrasting with the softer demand outlook.

Global Oil Demand Softens

The International Energy Agency (IEA) has revised its global oil demand growth forecast downwards for the second consecutive month, attributing the adjustment to a combination of economic slowdown and mild weather conditions in Europe. The revised forecast now stands at an increase of 1.1 million barrels a day for this year, down by about 140,000 barrels from previous expectations. This adjustment reflects a contraction in demand during the first quarter in affluent nations, despite an upward revision for the overall 2023 estimates. The IEA highlighted poor industrial activity and another mild winter as key factors reducing gasoil consumption, particularly in Europe where the declining share of diesel cars has also played a role.

Oil Prices and Market Dynamics

Brent crude oil prices are hovering around $83 a barrel in London, experiencing a 10% decline from this year's peak. This price movement is influenced by a fragile economic outlook and an abundance of US oil supplies, which have mitigated concerns over Middle East tensions and production cuts by OPEC+. Despite the lower growth forecast, the IEA anticipates that consumption will still reach an annual record of 103.2 million barrels a day this year. This outlook contrasts with more optimistic demand growth projections from industry players like Gunvor Group and Trafigura Group, which estimate demand growth closer to 1.4 to 1.5 million barrels a day.

Supply Deficit and OPEC+ Decisions

The global oil market is expected to face a supply deficit this quarter, primarily due to output reductions by the OPEC+ coalition, led by Saudi Arabia. This deficit is likely to deepen in the third quarter if OPEC+ decides to maintain its production curbs during its meeting on June 1, as widely anticipated. The IEA has maintained its demand increase estimate for 2025 at 1.2 million barrels a day, indicating a steady but moderate growth outlook for global oil demand.