International Energy Agency (IEA) projects robust growth in global oil demand, surpassing initial expectations. The agency anticipates a demand of 102 million barrels per day (mb/d) in 2023 and a further increase to 102.9 mb/d in 2024, citing a growth rate of 2.4 mb/d for the revised 2023 forecast.
The resilience demonstrated in U.S. oil deliveries, stronger than initially indicated, contributed to the adjusted demand forecast. Notably, Chinese oil demand reached a new peak of over 17 mb/d in September, primarily driven by a thriving petrochemical industry. However, this surge adversely affected petrochemical producers in other regions.
Despite a growth rate lower than the current year, the IEA expects global oil demand to hit a record high of 102.9 mb/d in 2024. The report highlights that world oil supply growth is also exceeding initial projections.
Contrary to concerns about the Israeli-Hamas conflict escalating into a wider regional crisis, disrupting oil supply flows, global oil supply is steadily increasing. October witnessed a rise of 320 thousand barrels per day in output compared to the previous month.
Although the market rally that pushed oil prices towards triple digits in September reversed in October, benchmark oil prices remained at $82.81 per barrel as of November 15.
Major oil exporters Saudi Arabia and Russia confirmed in early November that they would continue extra voluntary output cuts until the end of 2023. These reductions are expected to create a substantial shortage in the oil market through year-end. The OPEC+ alliance, comprising both countries, currently pumps 900 thousand barrels per day below the demand for their crude oil.
In Q3/2023, global crude oil inventories experienced a significant decline of 140 million barrels, reaching a new low. This drop was attributed to refineries increasing their activity before seasonal maintenance. However, the pace of demand growth is expected to slow down, potentially leading the market into a surplus in 2024.
Despite the ongoing imbalance between demand and supply, Giovanni Serio, the Global Head of Research at Vitol, stated during the Financial Times Asia Commodities Summit that the global oil market is currently fairly balanced. He noted that global oil demand has exceeded 2019 levels and is expected to continue growing. Serio emphasized the need to limit oil supply, even with extra reductions by major oil producers like Saudi Arabia, despite relatively low investments in the oil sector in recent years.
Furthermore, he highlighted that the production increase from non-OPEC countries has surpassed previous peaks and is still rising. Notably, Nigeria’s oil output has exceeded expectations, contributing to the overall increase in global oil production.
