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Global oil demand has been slowing “drastically” in the fourth quarter of 2023 and countries outside the Opec+ cartel will be able to face all the increases in consumption expected for next year, the west’s energy watchdog said on Thursday.
In its regular update on the market, the International Energy Agency signalled that the combination of sluggish international demand and increasing supply by non Opec+ countries such as the US is set to continue.
Those factors have already pushed oil prices below $75 a barrel from near $100 in September, while the influence of Opec+ has weakened, with recent cuts in output taking its market share to 51 per cent.
That is the lowest since the 2016 creation of the expanded cartel, which includes Opec members plus countries such as Russia, Mexico and Azerbaijan.
Forecasting that “global oil demand growth will slow drastically” in the current quarter, the IEA said demand would be almost 400,000 barrels a day lower for the period than it had anticipated just last month.
It added that this reflected the “deterioration in the macroeconomic climate”, with higher interest rates and a “fading rebound from Covid-induced lows”.
The watchdog also noted that record supply from the US and rising output from producers such as Guyana and Brazil would enhance oil supplied by non-Opec countries by 1.2mn b/d in 2024 — more than the 1.1mn b/d forecast for demand growth.
The IEA says the US, which is already producing 20mn b/d, will remain the leading source of supply growth next year.
With such increases coming online, cuts of 2.2mn b/d announced by Opec+ last month — and due to enter force in the first quarter of 2024 — have so far failed to revive oil prices.
The IEA now expects oil demand growth to tumble from a year-on-year rate of 2.8mn b/d in the third quarter of 2023 to 1.9mn b/d in this quarter.
It had previously forecast that demand growth this quarter would be 2.3mn b/d.
The watchdog added that more than half of this revision was due to weaker demand in Europe, “where unprecedented rate hikes in 2022-23 are working their way through an already stagnant manufacturing sector.”
The agency also forecasts weaker demand for the Middle East and Russia, in an indication of the breadth of the economic slowdown.
But it expects global oil demand to enhance by 130,000 b/d more than previously projected in 2024, adding that a “soft landing” in the US was “coming into view”.
In such a scenario, the US Federal Reserve would succeed in bringing inflation back towards its 2 per cent target without tipping the world’s largest economy into a recession.
