The oil market is shifting from a surplus to a supply deficit that will last for all of 2024 if OPEC+ further extends its production cuts until the end of the year, the International Energy Agency (IEA) said on Thursday.
Early this month, the members of the OPEC+ alliance that had pledged the Q1 cuts announced they would roll over the supply reductions until the end of the second quarter.
In its Oil Market Report for March, the IEA now assumes that OPEC+ would continue with the voluntary cuts through 2024, which prompted the agency to change its view on the supply-demand balance this year.
“Our balance for the year shifts from a surplus to a slight deficit,” the IEA said in its closely-watched report today, although it said that the currently massive volumes of oil on water could bring some relief to the market when the cargoes reach their final destination.
The IEA also raised its 2024 outlook on global oil demand growth, by 110,000 barrels per day (bpd) from the February report. The Paris-based agency revised up its demand growth projection to 1.3 million bpd for 2024, compared to 1.2 million bpd expected in last month’s report.
The reasons for the IEA’s upward revision to demand are an improved outlook for U.S. oil demand, and higher demand for bunker fuel use, due to the trade flow disruptions in the Red Sea, which have made many vessel operators to opt for the longer route between Europe and Asia via the Cape of Good Hope in Africa.
Despite the increased demand growth outlook, the IEA’s view on oil consumption growth continues to be much more conservative than OPEC’s.
Earlier this week, OPEC said in its own monthly report that it expects global oil demand to expand by a “robust” 2.2 million bpd in 2024, and to see another 1.8 million bpd annual growth in 2025.