By Giulia Petroni
The International Energy Agency lifted its forecast for oil-demand growth this year on an improved outlook in the U.S. and increased bunkering, while it cut estimates for global supply on lower output expectations from OPEC+.
Oil-demand growth is now seen at 1.3 million barrels a day from a previous forecast of 1.2 million barrels a day, the Paris-based organization said. Total demand is expected to average 103.2 million barrels a day from previously 103 million barrels a day.
The revision was attributed to surging ethane demand in the U.S. for the petrochemical sector and increased bunker fuel use due to trade flow disruptions caused by Houthi attacks on Red Sea shipping.
Still, the IEA confirmed demand growth is expected to decelerate significantly from last year's growth of 2.3 million barrels a day.
"The slowdown in growth means that oil consumption reverts towards its historical trend after several years of volatility from the post-pandemic rebound," it said on Thursday. "A weaker economic outlook further tempers oil use, as do efficiency improvements and surging electric vehicle sales."
The IEA's projection remains substantially lower than OPEC's, as the group of oil-producing countries reiterated this week that it sees global oil-demand growth of 2.2 million barrels a day this year and 1.8 million barrels a day the next.
Meanwhile, the global supply-growth forecast was cut to an average of 102.9 million barrels a day from 103.8 million barrels a day previously, the agency said, after OPEC+ output expectations were lowered by 920,000 barrels a day.
"Our balance for the year shifts from a surplus to a slight deficit," the IEA said. The agency previously said it expected a surplus assuming OPEC+ would start unwinding cuts from the second quarter of the year, but the group of oil-producing countries earlier this month decided to extend its voluntary curbs until June.
In the first quarter, global oil output is projected to fall by 870,000 barrels a day compared with the fourth quarter of 2023, due to weather-related constraints and OPEC+ output cuts. Non-OPEC production is set to dominate from the second quarter onward.
"The United States is set to lead the world's supply growth for a fourth year running," the IEA said. "Saudi Arabia, on the other hand, could post the world's largest decline for a second straight year if it continues to shoulder the bulk of the OPEC+ reduction."
Non-OPEC+ production rebounded by 270,000 barrels a day in February compared with the previous month, as operations in the U.S. and Canada partially recovered from an Arctic freeze. According to the IEA, non-OPEC+ supply is expected to rise by 1.6 million barrels a day this year compared with 2.4 million barrels a day in 2023.
Meanwhile, Russian crude exports fell by 140,000 barrels a day in February to 7.6 million barrels a day, with commercial revenue down 1% compared with the previous month to $15.7 billion.
The IEA's latest report came after crude futures rose on signs of healthy demand after the Energy Information Administration reported a large weekly draw in U.S. inventories and Ukraine intensified attacks against Russia's energy infrastructure, damaging some major refineries and raising fears around supply disruptions.
Oil prices have been trading in a narrow range in recent weeks as the market grapples with conflicting signals on supply and demand. OPEC+ extension of output cuts and geopolitical risks in the Middle East continue to underpin prices, but concerns over Chinese demand and the path of U.S. interest-rate cuts linger, capping price gains.
Brent crude, the international benchmark, currently trades around $84 a barrel, while WTI, the U.S. oil gauge, is around $80 a barrel.
Write to Giulia Petroni at giulia.petroni@wsj.com
(END) Dow Jones Newswires
03-14-24 0540ET
