The IEA has downgraded its world oil demand growth forecast for this year by 220,000 b/d, citing a deteriorating economic outlook mainly concentrated in OECD countries.
The downwards revision is the first this year by the Paris-based agency, which had been steadily increasing demand growth forecasts since January. The IEA's latest Oil Market Report (OMR) now sees world oil demand growing by 2.23mn b/d to 102.08mn b/d in 2023. Its previous forecast had demand growing by 2.45mn b/d.
The agency revised up its demand growth for 2024 by 290,000 b/d to 1.1mn b/d compared with its last report. This would see demand hitting 103.2mn b/d next year.
The IEA said world oil demand was coming under strain from a "challenging economic environment" largely caused by a "dramatic tightening of monetary policy in many advanced and developing countries." It said the contrast between OECD and non-OECD countries has continued to sharpen in recent months, with demand in Europe languishing "amid a deepening slump in manufacturing."
While China is set to account for the majority of the world's demand growth this year — around 1.6mn b/d — the IEA said its post-pandemic reopening had so far failed to extend beyond travel and services and that its economic recovery was losing steam.
The IEA sees global oil supply expanding by 1.6mn b/d this year, compared with 1.4mn b/d in its previous report.
"Higher flows from Iran, Kazakhstan, Nigeria, the US and other non-Opec+ producers have so far blunted the impact of cutbacks by some Opec+ countries," the IEA said. But Saudi Arabia's decision to cut crude output by 1mn b/d for July and August should see supply "shift towards a lower trajectory in coming months," it said. On Russia's pledge to cut oil exports by 500,000 b/d for August, the IEA said this might not affect production because to rising seasonal domestic demand.
"Based on our assumptions for demand and non-Opec+ supply, Opec+ could be producing 2mn b/d below the call on its crude in July and close to 3mn b/d below in August," the IEA said.
This year's estimates from the IEA indicate a supply deficit of 580,000 b/d for 2023. The agency saw a supply surplus of 650,000 b/d in the first half of the year, more than offset by a 1.69mn b/d deficit in the second half.
It said global observed oil inventories grew by 19mn bl in May to the highest since September 2021. Its preliminary data for June show a fall of 9.2mn bl.
