Wither Oil Demand? IEA And OPEC Disagree
- IEA and OPEC have conflicting oil demand forecasts.
- OPEC's forecast is more optimistic, focusing on non-OECD countries.
- The disagreement raises uncertainty in the oil market.
Recent economic data indicates a slowdown in growth for the U.S. and several major global economies, prompting the International Energy Agency (IEA) to project a modest increase in oil demand of only 1 million barrels per day (mb/d) this year and 0.9 mb/d next year. In contrast, OPEC anticipates a more optimistic rise of 2.1 mb/d this year and 1.8 mb/d next year, highlighting a significant disparity in outlooks between the two organizations. China's role in this dynamic is crucial, as it now represents 16% of global oil demand. The country has recently stopped publishing certain data that could reflect negatively on its economic status. Despite the IEA's conservative estimates, it is expected that China will contribute to half of the projected growth in oil demand by 2025, while demand from OECD countries is predicted to decline. Historically, the IEA has underestimated demand growth in non-OECD countries due to data lags. The potential for a reduction of 0.5 mb/d to 1 mb/d in current demand forecasts is significant, especially as OPEC+ oil demand is expected to remain flat next year. The contrasting forecasts from OPEC and the IEA suggest that pressure on OPEC+ may be less likely, although OPEC's predictions may appear overly optimistic. While the Chinese economy seems to be struggling, leading to concerns about anemic demand growth, the overall global economic weakness could impact non-OECD demand, aligning it more closely with the IEA's forecasts. If this trend continues, it may necessitate reduced production quotas, posing challenges for OPEC+ in the coming months.