The International Energy Agency’s (IEA) latest oil market report paints a positive picture for global demand in 2023, but comes with a caveat: The agency has cut its demand forecast by 400,000 barrels per day (bpd) for the fourth quarter of 2023, with half of the cut coming from to Europe.
With this in mind, the agency predicts that another important event that will affect oil price trends in 2024 will be an increase in non-OPEC production.
What does the report say?
One of the key figures in the report is that global oil demand will rise by 2.3 million barrels per day (mbpd) to 101.7 mbpd.
The International Energy Agency (IEA) points to a sharp increase in US oil production, which recently reached 13.24 million tonnes per day (according to EIA data), and notes that there has been an increase in production in non-OPEC countries, which are the world’s biggest oil producers. exporters.
Increases in oil production in Guyana, Brazil and Iran have boosted global supply by about 1.8 million tonnes per day, reaching 101.9 million tonnes per day in 2023, the IEA says, while in 2024 these countries are poised to increase global production by up to 3 million tons per day.
Elsewhere, Russia has begun to face the effects of sanctions as its crude oil exports fell sharply in November, which also reduced its export earnings, the IEA said. Oil and condensates revenues fell 17% during the month to $15.2 billion (€13.9 billion), the lowest since July 2023.
It is interesting to note that Russia also voluntarily reduced its exports and despite the drop in oil revenues in the month, its export revenues are still higher year-on-year.
More broadly, global inventories also recorded a significant decline, falling by 19.6 million barrels in October, according to the International Energy Agency (IEA).
Decline in oil demand in Europe
A worker shows crude oil from the China Petrochemical Corporation (Sinopec) well Yuejin 3-3XC in the Tarim Basin in northwest China’s Xinjiang Uygur Autonomous Region. (Photo: ZUMAPRESS.com)
Although the International Energy Agency (IEA) is optimistic about oil demand growth next year, there are also significant headwinds to be faced in markets, especially in Europe.
The IEA said global oil demand has fallen by about 400,000 barrels per day in the fourth quarter of 2023, with about half of that decline in Europe.
Global economic conditions have put downward pressure on oil prices, which have fallen 23% since the end of September 2023. The IEA said that European oil demand looks “particularly moderate amid major manufacturing and industrial slowdowns”.
The latest Purchasing Managers’ Index (PMI) in the Eurozone – one of the best indicators for assessing the state of the economy – confirms IAE’s forecasts: the December PMI shows that business activity continued to decline in every quarter this year.
More specifically, Hamburg Commercial Bank’s composite PMI was 47 points in December, compared to 47.6 points in November. Germany, Europe’s largest economy, recorded a steeper decline, indicating a recession.
On the other hand, the growth rate of France, Europe’s second largest economy, slowed down faster than expected. The employment index was also at a 3-year low of 49.6.
A report by the International Energy Agency (IEA) has warned of a possible decline in oil demand as evidence to support it becomes clearer.
“The pace of demand will decline from 2.8 million b/d annualized in Q3 to 1.9 million b/d in Q4,” the report said.
Some of the factors contributing to this decline are the tightening of monetary policies in countries and the general slowdown in the global economy. In addition, oil demand was further reduced by stricter regulations on efficiency standards and the increasing use of electric vehicles.
The year 2023 has been significant for the world oil markets in general and European markets in particular. The IEA hopes its report will prepare the global economy for the coming year.
2023-12-22 08:02:00
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