IEA cuts demand forecast amid ongoing financial issues

Two large oil tankers unload at the 300,000-ton crude oil terminal in Yantai port, east China’s Shandong province, 9 July 2023.

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The International Energy Agency on Thursday lowered its forecast for global oil demand growth for the first time this year, citing a deteriorating economic outlook that is “particularly weighing heavily” on wealthy countries.

The world’s top energy regulator said global oil demand is expected to increase by 2.2 million barrels per day in 2023, reaching an average of 102.1 million barrels per day.

According to the IEA, China is likely to account for 70% of demand growth.

Still, this forecast represents a downward revision of 220,000 barrels per day from last month’s report, when the IEA predicted a 2.4 million barrel per day increase in global growth.

“Persistent macroeconomic headwinds, reflected in a deepening manufacturing slump, have prompted us to downgrade our 2023 growth estimate for the first time this year,” the IEA said in its latest monthly oil market report, which was released on Thursday has been published.

“Global oil demand is coming under pressure from the difficult economic environment, not least the dramatic tightening of monetary policy in many developed and developing countries over the past 12 months,” the agency added.

Looking ahead next year, the IEA expects demand growth to slow to 1.1 million barrels per day “as the recovery loses momentum and increasing electrification and efficiency measures for the vehicle fleet take hold.”

The IEA said last month that global demand will come to a near standstill in the coming years, peaking before the end of the decade as the fossil-fuel transition gathers momentum.

Thursday’s report comes as the latest US inflation and economic data are reviving hopes that the Federal Reserve may soon be ending its cycle of interest rate hikes.

Oil prices traded slightly higher Thursday morning, continuing their month-to-date gains.

September-dated Brent crude futures were up around 0.4% at $80.42 a barrel as of 9am London time, while US West Texas Intermediate crude futures with August delivery were up 0.3% and at traded at $75.98 per barrel.