IEA: Raises oil demand expectations for the next two years, expects a small-scale supply surplus in the first half of next year.

The International Energy Agency (IEA) has raised its global oil demand forecast for the next two years, but the decline in demand next year will far exceed the decline in supply, resulting in an oversupply.

On November 14th, in its latest monthly report, the IEA raised this year's demand growth from last month's 2.3 million barrels per day (b/d) to 2.4 million b/d, and next year's demand growth from last month's 880,000 b/d to 930,000 b/d, with total demand reaching 102.9 million b/d.

The organization stated that this year's growth in oil demand is mainly driven by a few non-OECD countries, with China leading the way. China's oil demand reached a record high of 17.1 million b/d in September, marking the fifth record-breaking month this year.

The IEA predicts that by 2023, China's oil demand will reach 102 million b/d, accounting for 1.8 million b/d of the total growth of 2.4 million b/d.

In terms of supply, the IEA expects global total supply to increase by 1.7 million b/d this year, reaching a record high of 101.8 million b/d, largely due to the rapid growth in oil production in countries such as the United States, Brazil, and Guyana.

According to the data from the organization, US oil supply has increased by 1.2 million b/d compared to the same period last year, far surpassing the production cuts in Russia and Saudi Arabia. US oil production is expected to reach 19.3 million b/d this year, setting a new record as the world's largest oil-producing country.

The IEA predicts that US supply growth will slow down in 2024, with an expected increase of only 400,000 b/d, but this will still bring the US close to its target of nearly 20 million b/d by the end of next year.

Oversupply

In terms of inventories, the IEA report shows that crude oil inventories fell sharply by 141.4 million barrels in the third quarter of this year, and finished product inventories fell by 112.7 million barrels, due to supply cuts by OPEC+ countries and increased refinery activity.

However, in the last three months of this year, the upward revision in demand by the IEA is only half of the supply increase of 400,000 b/d from non-OPEC countries, resulting in a shortfall of less than 1 million b/d, while OPEC previously predicted a shortfall of around 4 million b/d.

At the same time, the IEA states that as global economic growth slows down and the impact of high interest rates becomes apparent, demand and supply will slow down next year. However, with a significant slowdown of 60% in demand growth, the global oil market will once again be in a state of oversupply in the first half of 2024.

According to the organization's forecast, global oil demand in 2024 will be 102.9 million b/d, while supply will be 103.4 million b/d, indicating a small-scale oversupply.

The IEA points out that although there are conflicts in the Middle East, concerns about supply have eased compared to a month ago.

Brent crude oil prices reached a high on October 19th and then fell to slightly above $80 per barrel over the weekend. IEA (International Energy Agency) has stated that the market remains unstable, especially with the escalation of geopolitical risks. Although a slight supply surplus is expected in the market next year, this situation could quickly change:

Currently, with the arrival of winter in the northern hemisphere, demand still exceeds available supply, and market balance will continue to be influenced by economic and geopolitical risks, as well as future fluctuations.

Saudi Arabia has already expanded its production cut by 1 million barrels per day. Some analysts predict that it will continue to limit production next year, and this may be announced at the OPEC+ alliance meeting on November 26. OPEC recently attributed the recent decline in oil prices to the "tricks" of speculators in its monthly report.