Home Business News IEA raises its forecast for oil demand and warns of supply disruptions from the Middle East

IEA raises its forecast for oil demand and warns of supply disruptions from the Middle East

18th Jan 24 3:07 pm

Crude oil prices return to a slight decline today, continuing their sideways trend. Brent crude oil declined by 0.15%, and WTI crude oil also declined by about 0.7%.

The decline in oil prices came despite the International Energy Agency raising its forecast for oil demand this year, as it appears that continued concerns about demand from China have hindered crude prices from rising.

Today, we witnessed the January report issued by the International Energy Authority (IEA), the most notable of which was the IEA raising its forecast for oil demand in 2024 to 1.2 million barrels per day from 1.1 million in previous expectations.

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While this number is approximately half of what it was last year, during which the fourth quarter witnessed a contraction in demand by 1.7 mb/d compared to the same quarter of the previous year.

While the agency indicated that the decline in demand for oil this year will be due to the pressure of weak growth in major economies, in addition to the completion of the recovery from the COVID-19 epidemic and a further shift towards electric cars. While the report stressed that China will lead the growth in demand for oil this year, with the expansion of the petrochemical sector.

On the supply side, the authority expects the supply of crude oil to grow by 1.5 mb/d, thus reaching a new record level of 103 mb/d. While the report indicated that outside the Organization of Petroleum Exporting Countries and Russia (OPEC+) will lead supply growth this year, as the latter is expected to maintain the voluntary reduction in its oil production. While the agency also expects a decline in supply this month due to weather conditions in the United States and Canada, affecting oil supply operations.

The report also showed the agency’s concerns about possible disruptions to oil supplies due to the possible escalation of military actions in the Middle East and the Red Sea.

Returning to the demand side, I believe that the growth of the Chinese economy is the most important factor that will help oil prices rise again and this should receive the greatest focus from the markets.

Indeed, despite OPEC+ measures to support the market and the unprecedented escalation of military actions in the Middle East, we continue to see a relatively weak performance of oil prices, due to the weak performance of the Chinese economy.

Yesterday, we witnessed a sed of Chinese economic data, which continued to show a weaker performance than expected, both at the level of gross domestic product and retail sales, in addition to the high unemployment rate, in contrast for a higher-than-expected recovery in industrial production and fixed asset investments.

Prices in China are also shrinking in a worrying way, whether at the level of consumers, producers, or even house prices, which reflects weak demand conditions.

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