Macro

IEA Cuts Oil Demand Growth, Diverges From OPEC's View

IEA revises 2024 oil demand growth down by 140,000 bpd, contrasting OPEC's more optimistic outlook amidst global economic uncertainties.

By Mackenzie Crow

5/16, 13:08 EDT
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Key Takeaway

  • IEA cuts 2024 oil demand growth forecast by 140,000 bpd due to weak consumption in developed economies, contrasting OPEC's more optimistic outlook.
  • Supply growth estimate for 2024 revised down by the IEA from 770,000 bpd to 580,000 bpd amid outages and logistical challenges.
  • Recommended energy stocks include SM Energy with a year increase of 92.9%, Marathon Petroleum with a stock rise of 63.5%, and APA Corporation indicating an EPS growth of 8.4% for 2024.

Revised Oil Demand Forecast

The International Energy Agency (IEA) has adjusted its oil demand growth forecast for 2024 downward by 140,000 barrels per day (bpd), setting the new growth expectation at 1.1 million bpd. This revision is attributed to weak industrial activity in developed countries, a mild winter in Europe, and a shift away from diesel vehicles, which collectively have led to reduced gasoil consumption. Despite these adjustments, the IEA notes that resilient consumption in non-OECD countries, especially China, has provided some offset to the decline observed in OECD nations.

IEA vs. OPEC: Divergent Outlooks

The IEA's cautious stance on oil demand growth contrasts sharply with the more optimistic projections from the Organization of the Petroleum Exporting Countries (OPEC). While the IEA anticipates modest growth, OPEC expects a robust increase of 2.25 million bpd for 2024, highlighting a significant divergence in views regarding global economic resilience and oil demand dynamics. OPEC's bullish outlook is supported by expectations of a strong global economy and potential easing of monetary policies, projecting a growth of 1.85 million bpd for 2025, in stark contrast to the IEA's more conservative estimate of 1.2 million bpd.

Supply Adjustments and Market Implications

The IEA has also revised its oil supply growth estimates for 2024 downwards from 770,000 bpd to 580,000 bpd, citing significant outages in Brazil and logistical challenges in the U.S. Despite these adjustments, global oil supply is anticipated to reach a record high of 102.7 million bpd. This supply-demand balance will play a critical role in OPEC+'s decision-making regarding the extension of voluntary output cuts in its upcoming June meeting. The divergence between IEA and OPEC projections sends mixed signals about the future of the oil market, with the IEA's cautious approach reflecting concerns over high borrowing costs and inflation, while OPEC's optimism hinges on economic growth and favorable monetary policies.