IEA trims global oil demand outlook

The International Energy Agency (IEA) reported a softening outlook for global oil demand growth this year, attributing it to an economic slowdown and mild weather in Europe.

The outlook indicates a rise in world fuel consumption by 1.1 million barrels a day (bpd), marking a decrease of about 140,000 barrels compared to estimates from a month ago.

This downward revision, the second in consecutive months, reflects a contraction in demand during the first quarter in wealthy nations, along with an upward adjustment in estimates for 2023.

Moreover, the IEA highlighted that decreased industrial activity and a mild winter have particularly affected gasoil consumption, notably in Europe, where a diminishing number of diesel cars in the fleet had already been impacting consumption rates.

Despite trading near $83 a barrel in London, oil prices have retreated 10 per cent from this year’s peak due to the fragile economic outlook and ample US oil supplies, countering concerns over Middle East tensions and production cuts by OPEC+. However, the situation might not be as pessimistic as initially indicated by the report.

The agency noted that despite the lower growth forecast, consumption is still on track to reach an annual record of 103.2 million barrels a day this year, mainly due to the upward revision in the demand estimate for 2023.

Notably, the IEA’s oil-consumption projections are more conservative compared to many industry players, such as trading houses and Wall Street banks, which anticipate growth closer to 1.4 to 1.5 million bpd.

Furthermore, the IEA warned of a supply deficit in global oil markets this quarter, partly due to output reductions by the OPEC+ coalition, led by Saudi Arabia.

If the group decides to maintain these curbs during their meeting on June 1, as widely expected, the deficit is likely to deepen in the third quarter. The agency kept its estimates for 2025 unchanged, projecting a rise in world oil demand by 1.2 million barrels a day.