IEA raises 2024 oil demand growth estimate on US outlook, bunkering surge

The International Energy Agency on March 14 raised its estimate of 2024 oil demand growth by 110,000 b/d to 1.3 million b/d on an improved economic outlook for the US and higher bunker fuel consumption due to attacks in the Red Sea.

In its monthly oil market report, the agency highlighted a surge in oil inventories "on water" due to the increased journeys tankers are having to make to avoid the Red Sea, while estimating that onshore oil stocks globally were at their lowest since at least 2016.

"In February alone, oil on water surged by 85 million barrels as repeated tanker attacks in the Red Sea diverted more cargoes around the Cape of Good Hope," it said.

Against the more bullish factors for demand, it lowered its estimate of China's demand growth this year by 80,000 b/d to 610,000 b/d, citing a more subdued economic outlook.

The IEA also slashed its estimate of average 2024 oil supply by 930,000 b/d to 102.86 million b/d following the extension of OPEC+ voluntary output cuts announced March 3, as well as cold weather that disrupted Canadian production early in the year.

"Preliminary data for February show oil on water rose by an exceptionally strong 84.7 million barrels. By contrast, on-land stocks fell for a seventh consecutive month. Global crude oil inventories could remain below average levels in the near term after OPEC+ announced... it will extend additional voluntary cuts through the second quarter," the IEA said.

In the OECD, industry stocks had fallen counter-seasonally by 14.7 million barrels in January to the lowest level in 16 months, it said. "At 2.759 billion barrels, they were 108.6 million barrels below the 2019-23 average."

Outlook divergence

The IEA's upward revision to this year's demand growth estimate still leaves it less bullish than OPEC, which in its own monthly oil market report on March 12 maintained that demand would grow by 2.2 million b/d this year, falling to 1.8 million b/d in 2025. The IEA puts more emphasis on the role of electric vehicle adoption in stemming demand compared with OPEC.

Analysts at S&P Global Commodity Insights have forecast oil demand to grow by 1.7 million b/d in 2024 followed by 1.08 million b/d in 2025.

Oil prices have shown steady increases as the crisis for Red Sea shipping has intensified in recent months. The Platts Dated Brent benchmark was assessed at $84.27/b on March 13, up from $75.70/b on Jan. 2.