IEA sees global oil demand softening

The outlook for global oil demand growth this year continues to soften amid an economic slowdown and mild weather in Europe, the International Energy Agency said. 

World fuel consumption will increase by 1.1 million barrels a day this year, about 140,000 barrels less than expected a month ago, the Paris-based adviser said, trimming its projections for the second month in a row. The forecast change reflects a first-quarter demand contraction in rich countries combined with an upward revision to estimates for 2023.

“Poor industrial activity and another mild winter have sapped gasoil consumption this year, particularly in Europe, where a declining share of diesel cars in the fleet were already undercutting consumption,” said the IEA, which advises most major economies.

Oil prices are trading near $83 a barrel in London, having retreated 10% from this year’s peak as the fragile economic outlook coupled with abundant US oil supplies offset fears over Middle East conflict and production curbs by OPEC+. 

Still, the picture may not be as bearish as the report initially suggests. Consumption remains on track to reach an annual record of 103.2 million barrels a day this year even with the lower growth forecast, according to the agency. That’s because its demand estimate for 2023 was revised higher.

The IEA’s oil-consumption estimates are lower than much of the industry, from trading houses to Wall Street banks. Commodities giants like Gunvor Group and Trafigura Group project growth closer to 1.4 million or 1.5 million barrels a day of demand growth this year. 

Global oil markets face a supply deficit this quarter, in part due to output cutbacks by the OPEC+ coalition, led by Saudi Arabia, according to the IEA. The shortfall will deepen in the third quarter if the group chooses to maintain the curbs when it meets on June 1, as is widely expected. 

The agency made no changes to estimates for 2025, when it expects that world oil demand will increase by 1.2 million barrels a day.