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IEA Raises 2023 and 2024 Oil Demand Growth Forecasts

Despite economic challenges, the IEA has upgraded its oil demand growth predictions for 2023 and 2024, reflecting an upbeat view.

The International Energy Agency (IEA) has revised its oil demand growth forecasts for 2023 and 2024, indicating an optimistic outlook despite economic challenges. 

While acknowledging slower economic growth in major economies, the IEA projects a market shift into surplus at the beginning of 2024 after a period of significant deficit.

Market Vulnerability to Economic and Geopolitical Risks:

Despite the positive forecasts, the IEA warns that market balances remain vulnerable to heightened economic and geopolitical risks, emphasizing the potential for further volatility in the oil market. 

Ongoing economic uncertainties and geopolitical factors could impact market dynamics, particularly as demand continues to outstrip available supplies heading into the Northern Hemisphere winter.

Supply Cuts Maintaining Deficit Through Year-End:

The IEA attributes the current significant deficit in the oil market to voluntary cuts from major producers such as Saudi Arabia and Russia. 

These cuts, set to last until the end of December, have played a crucial role in supporting the market. However, the IEA anticipates a potential shift to surplus at the start of 2024.

Factors Supporting 2023 and 2024 Demand Growth:

Resilient U.S. deliveries and record September demand from China contribute to the positive outlook for oil demand growth in 2023. 

The IEA expects global demand to rise by 2.4 million barrels per day (bpd) in 2023, up from its previous forecast of 2.3 million bpd. 

For 2024, the IEA will raise its demand growth forecast to 930,000 bpd, citing hopes of interest rate cuts and the recent fall in crude prices.

Discrepancy with OPEC’s Forecast:

While the IEA aligns more closely with OPEC’s 2023 demand growth forecast, its 2024 outlook remains significantly lower. 

OPEC forecasts a demand growth of 2.25 million bpd for 2024, creating a notable difference of 1.32 million bpd between the two organizations. 

This discrepancy highlights ongoing differences in long-term oil demand outlooks and underscores the challenges of predicting market trends.

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