Oil prices have experienced a decline following the International Energy Agency’s (IEA) revised forecasts, which indicate a significant oversupply in the market by the end of this year. The agency’s latest report, released on September 13, 2023, predicts that global oil demand will increase by only 680,000 barrels per day (bpd) in 2023, a reduction from previous estimates.
According to the IEA, global oil demand is expected to reach 104.4 million bpd in 2024 after a projected increase of 700,000 bpd in 2026. This adjustment marks a downward revision of 20,000 bpd in demand growth estimates since July, continuing a trend of five consecutive reductions. Since the beginning of the year, the IEA has cut its forecast for 2025 oil demand growth by a total of 350,000 bpd.
The IEA’s assessment highlights a “lacklustre demand” across major economies, attributing the weak outlook to subdued consumer confidence. As a result, the agency suggests that a sharp rebound in oil consumption appears unlikely. Notably, emerging and developing economies, including China, Brazil, Egypt, and India, have all seen downward adjustments in their demand projections compared to previous reports.
Jet Fuel Demand Offers Some Hope
Despite the overall decline in demand forecasts, the IEA pointed out that jet fuel consumption is projected to increase by 2.1% this year, making it the strongest growth among all oil products. However, even with this increase, projected jet fuel consumption of 7.7 million bpd in 2025 will still fall short by approximately 180,000 bpd compared to pre-COVID levels in 2019.
While the IEA has lowered its demand growth estimates, it simultaneously raised its global supply growth forecast by 370,000 bpd to 2.5 million bpd for 2023. This adjustment follows an agreement by eight OPEC+ members to increase production by 547,000 bpd in September, effectively reversing the 2.2 million bpd cuts established in November 2023.
The report also addressed the potential impact of sanctions on Russia and Iran, which could limit supplies from these countries. Nevertheless, the IEA emphasized that “oil market balances look ever more bloated,” with forecasted supply significantly surpassing demand as the year progresses and into 2026.
Contrasting Views on Demand Growth
The outlook provided by the IEA contrasts sharply with the more optimistic view expressed by OPEC in its recent report. OPEC suggested that demand in 2026 is poised to strengthen, particularly in key oil-consuming regions. This disparity in forecasts raises questions about the future dynamics of the global oil market.
As the year draws to a close, the implications of these revised forecasts will likely influence not only oil prices but also the broader economic landscape as countries navigate the challenges of fluctuating energy demands and supply chains. The situation calls for keen observation as the IEA and OPEC continue to assess and respond to the evolving market conditions.
