The International Energy Agency (IEA) projects a significant increase in global oil demand, citing heightened fuel requirements due to shipping disruptions in the Red Sea caused by Yemen’s Houthi rebels. Additionally, a brighter economic outlook in the United States contributes to this upward trend, as stated in the IEA’s monthly oil report released recently.
With a 110,000 barrels per day (bpd) upward revision, the IEA anticipates a stronger growth trajectory, forecasting a 1.3 million bpd increase in global oil demand for this year.
The disruptions in international trade routes triggered by the turmoil in the Red Sea result in lengthier shipping distances and accelerated vessel speeds, consequently amplifying bunker demand—the fuel needs of ships.
The IEA underscores the impact of these disruptions, with approximately 1.9 billion barrels of oil at sea by the end of last month, nearing levels observed during the COVID-19 pandemic peak. Longer shipping routes have propelled fuel demand, evidenced by record-high fuel loading in Singapore.
However, the IEA cautions that despite the short-term boost from shipping disruptions, the global economic slowdown and uncertain economic prospects pose challenges to sustained demand growth. Vehicle efficiency improvements and the expansion of electric vehicle fleets further contribute to this outlook.
The agency emphasizes a shift in demand growth towards non-OECD countries, with China’s dominance expected to diminish gradually. Nonetheless, annual demand growth remains lower compared to previous years due to advancements in energy efficiency and electric vehicle adoption.
In terms of market dynamics, the IEA predicts a potential market deficit should the OPEC+ producer bloc maintain voluntary cuts through 2024. Oil prices saw an uptick following the report’s release, with Brent crude futures rising to $84.75 a barrel and US West Texas Intermediate (WTI) crude climbing to $80.55 a barrel.
Analysts remain cautiously optimistic, noting the disparity between the IEA’s outlook and OPEC’s prognosis, yet highlighting the positive sentiment prevailing in the market.
