World oil demand will rise faster than expected next year, the International Energy Agency (IEA) said on Thursday, a sign that the outlook for near-term oil use remains robust despite this week's COP28 agreement to transition away from fossil fuels.
Despite the upgrade, there is still a sizeable gap between the IEA, which represents industrialised countries, and producer group OPEC over 2024 demand prospects. The two have clashed in recent years over issues such as long-term demand and the need for investment in new supplies.
World consumption will rise by 1.1 million barrels per day(bpd) in 2024, the Paris-based IEA said in a monthly report, up 130,000 bpd from its previous forecast, citing an improvement in the outlook for the United States and lower oil prices.
The IEA, which advocates a speedy transition away from fossil fuels, detailed the increase to its 2024 forecast only at the bottom of Page 4 of its report, after discussing other findings including a demand slowdown in the last three months of 2023 and rising supply.
The 2024 revision reflects "a somewhat improved GDP outlook compared with last month's report," the IEA said. "This applies especially to the U.S. where a soft landing is coming into view."
"Falling oil prices act as an additional boost to oil consumption," it said.
Oil has weakened to a six-month low near $72 a barrel this week, even after OPEC+, which includes OPEC oil-exporting nations and allies such as Russia, on Nov. 30 announced a new round of production cuts for the first quarter of 2024.
Crude LCOc1 was up almost 2% on Thursday after the IEA report was released to trade near $76.
Demand slowdown
In the report, the IEA also trimmed its forecast for oil demand growth in 2023 by 90,000 bpd to 2.3 million bpd and lowered its fourth-quarter estimate by almost 400,000 bpd.
A halving in the rate of demand expansion next year is due to below-trend economic growth in major economies, efficiency improvements and a booming electric vehicle fleet, the IEA said.
The extension of OPEC+ supply cuts into the first quarter of next year had done little to boost prices and higher output in other nations would act as a headwind, it added.
"The continued rise in output and slowing demand growth will complicate efforts by key producers to defend their market share and maintain elevated oil prices," it said.
OPEC in a monthly report on Wednesday kept its forecast for world oil demand growth in 2023 at 2.46 million bpd. In 2024, OPEC sees demand growth of 2.25 million bpd, also unchanged from last month.
The difference between the IEA and OPEC 2024 forecasts has narrowed slightly but stands at 1.15 million bpd - equivalent to roughly 1% of daily world oil use and the daily production of an OPEC member such as Libya.
Oil demand forecasters often have to make sizeable revisions given changes in the economic outlook and geopolitical uncertainties, which this year included China's lifting of coronavirus lockdowns and rising interest rates.
(Reuters - Reporting by Alex Lawler; Editing by Jason Neely and Mark Potter)