Barrelling Ahead: 2024 Demand Debate
The nearly 1 MMbpd demand growth forecast difference between OPEC and the Western oil agencies will set the speed limit for OPEC+’s hopeful—eventual—production cut wind down.
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The three major oil-watching agencies—the EIA, IEA, and OPEC—all expect global oil demand growth to decelerate in 2024 from the heady gains experienced in 2023, weighed down by a slowing China.
Still, there’s a roughly 1 MMbpd gap among this group of demand growth expectations with OPEC leading the pack, the ultimate reckoning of which will determine the eventual pace of OPEC+’s [hopeful] production cut easing.
OECD demand growth is expected to teeter on the edge of mild growth or contraction, and represents an early bellwether for the degree to which energy transition policies are reducing oil intensity in advanced economies.
All major agencies see Chinese growth decelerating materially, off the voracious pace realized in 2023, but there is considerable daylight between all agencies as to the exact level of current demand.
OPEC’s demand forecasts are most notably stronger than its Western agency counterparts on ex-China non-OECD growth, with the producer group seeing growth of roughly a half-million daily barrels above the EIA and IEA in both 2023 and 2024.
It’s a new year, which means a new set of forecasts—and implicit assumptions about the current state of the oil market—from petroleum producers, consumers, and analysts alike. We’re four years on from the onset of the historic fuel market disruption wrought by COVID-19 and, after a nearly half-decade of comparing our current market status relative to “the pre-pandemic norm”, it’s honestly hard to remember what a “normal” annual outlook actually looks like.
While 2023 was largely a story of surprisingly strong non-OPEC (and exempted OPEC) supply growth, 2024 is already setting up to be judged on consumption expectations. That is, the biggest structural disagreement amongst the Agencies’ outlooks is on the demand side of the oil balance ledger—further complicating matters, the Agencies still remain reasonably split on where, exactly, demand stood in 2023, with fully 1 MMbpd of global demand difference between the high and low annual average estimate for the year.
It should be no surprise that OPEC is comparatively bullish on demand prospects given that the pace of global oil demand growth ultimately represents the overarching speed limit governing any hopeful easing of OPEC+’s production cuts. OPEC’s own monthly forecast has growth advancing two-thirds faster at 2.3 MMbpd vs. both the IEA and EIA that are estimating global demand growth slowing to 1.3-1.4 MMbpd in 2024.
My Barreling Ahead series provides comparative analysis of the oil supply and demand forecasts published by the Big-3 oil-watching organizations: the US Energy Information Administration (EIA)’s Short-Term Energy Outlook (STEO), International Energy Agency’s (IEA) Oil Market Report (OMR), and the Organization of Petroleum Exporting Countries’ (OPEC) Monthly Oil Market Report (MOMR). This post will look at one of the key areas of disagreement amongst these three reports: demand.