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IEA cuts global oil demand growth
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OPEC lowers non-OPEC supply growth forecasts
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Geo-political risk premium wanes
IEA Predicts Global Oil Demand to Slow
The International Energy Agency (IEA) on the 12 th of April cut
its oil demand growth forecast for this and next year. The Paris based
agency lowered its estimate of oil demand growth in 2024 to 1.2 million bpd
from 1.3million bpd and 1.1 million bpd for 2025. [1] The IEA projects slower
economic growth in 2024 and 2025 and growing popularity of electric vehicles
(EV), which would weigh on crude prices.
IEA Anticipates Increase in Global Oil Supply
The agency predicts non-OPEC countries to substantially increase global oil
supply. IEA forecasts global oil production to rise by 770K bpd to 120
million bpd in 2024. For 2025, global oil supply is anticipated to increase
further by 1.6 million bpd, with non-OPEC+ potentially increasing output by
1.4 million bpd and OPEC+ contributing 220K bpd, subject to ongoing
production cuts.
IEA Forecast is in Stark Contrast with OPEC
The bearish outlook of IEA is in contrast to OPEC forecasts for robust
demand growth for this year and next. OPEC in its own monthly oil market
report on the 11 th of April maintained its estimates for global
demand growth of 2.2 million bpd in 2024, slowing to 1.8 million bpd in
2025. [2]
Despite its bearish view on oil demand, the IEA still forecasts inventory
declines for much of this year, if OPEC+ keeps its current output cuts in
place. The largest decline in stockpiles is likely to come in the third
quarter, which coincides with the peak summer demand in the northern
hemisphere.
OPEC Lowers non-OPEC Supply Growth
OPEC indicated on the 11 th of April that it is more optimistic
that non-OPEC supply growth in the coming months will slow, and revised
lower the expected production growth outside the bloc in 2024 and 2025.
Also, OPEC expects robust oil demand in the summer months and sees China,
Middle East and other Asian countries to increase demand in 2024.
Oil Prices Forecasts Revised Higher
The EIA’s report also shed light on adjustments in global oil price
forecasts. Brent crude oil prices are now projected to average $88.55 a
barrel in the current year, up from earlier estimate of $87.00. Similarly,
U.S. West Texas Intermediate (WTI) crude prices are forecasted to average
$83.78 a barrel in 2024, up from the $82.15 estimates in March.
The revision in prices is due to expectations of a bigger oil inventories
draw and ongoing geo-political risks.
Geo-political Tensions are the Main Risk to Prices
In 2023, strong growth in crude oil output from the United States, and
other countries outside OPEC + have helped to offset the impact of OPEC+
production cuts. Oil prices have rallied sharply from the onset of 2024,
driven by escalating Middle East tensions, attacks on Russian refineries,
extensions of OPEC+ production cuts until June and signs of potential rise
in crude oil demand. The geo-political conflict in the Middle East is seen
as one of the main drivers behind oil’s rally, as further escalation could
lead to supply disruptions, which would keep oil prices elevated in 2024.
Source: TradingView
Technical Analysis
The widely perceived strength in oil demand has been one of the main
drivers behind Brent’s 18% gains YTD, along with tighter supplies and
geo-political tensions in the Middle East. After bottoming at $73.01 in
mid-December 2023, Brent prices rebounded strongly from its support and
appear headed for a re-test of its previous key resistance of $97.43.
While initial hesitation could be seen around that level of resistance, a
subsequent break above it is highly likely in our view as crude is
approaching its seasonally strong period – the summer months in the northern
hemisphere.
Conclusion
While the EIA’s and OPEC reports offer valuable insights into production,
demand growth forecasts, and average oil price estimates, the influence of
geo-political tensions in the Middle East remains a key risk to oil
markets. Further escalation of the conflict in the region would undoubtedly
exert upward pressure on oil prices.
Professional traders seeking exposure to crude oil may opt for either
Leverage Shares
Brent Oil ETC
or Leverage Shares
WTI Oil ETC.
Traders looking for magnifies exposure may consider Leverage Shares
+2x Long WTI Oil
or
-2x Short WTI Oil
ETPs.
Footnotes:
- https://www.iea.org/reports/oil-market-report-april-2024
- https://www.opec.org/opec_web/en/publications/338.htm