The International Energy Agency (IEA) has dialed back its expectations for global oil demand growth in 2024, citing lower-than-anticipated consumption in developed economies belonging to the Organisation for Economic Co-operation and Development (OECD). In its monthly Oil Market Report, the IEA revised its 2024 growth forecast downward by 100,000 barrels per day (bpd) to 1.2 million bpd. This adjustment reflects a sluggish start to the year, with first-quarter oil demand growth falling short of predictions by 120,000 bpd at 1.6 million bpd.
The IEA attributes this lackluster performance to weaker economic conditions in OECD countries. Unusually warm weather dampened demand for heating oil, while a manufacturing slump across these advanced economies further reduced consumption of industrial fuels. The combined effect of these factors suggests the post-pandemic rebound in oil demand is nearing its end, with growth expected to decelerate further in 2025 to 1.1 million bpd.
The IEA's downward revision comes amid a complex interplay of forces shaping the global oil market. While concerns linger regarding energy security due to geopolitical tensions, the robust oil demand growth witnessed in the initial stages of the post-pandemic recovery appears to be fading. This slowdown coincides with rising oil production from non-OPEC+ countries, led by the United States, which is expected to outpace demand growth through 2025.
Looking ahead, the trajectory of oil demand will depend on several key factors. The pace of economic recovery, particularly in OECD countries, will be closely watched. Additionally, the continued expansion of the electric vehicle fleet and improvements in fuel efficiency are expected to exert a restraining influence on oil demand growth. How these competing forces ultimately play out will determine the future course of the global oil market.
The IEA's revised forecast suggests that the era of supercharged oil demand growth fueled by the post-pandemic rebound is coming to an end. The outlook for 2024 and 2025 points towards a more moderate pace of growth, shaped by both economic considerations and the accelerating transition towards a lower-carbon transportation sector.