By Giulia Petroni
The International Energy Agency cut its forecast for oil-demand growth this year as subdued industrial activity and mild winter temperatures reduced gasoil consumption across some of the world's largest economies, particularly in Europe.
Oil-demand growth is now seen at 1.1 million barrels a day from previously 1.2 million barrels a day, the Paris-based organization said in its latest monthly report. Total demand is still expected to average 103.2 million barrels a day.
The revision was driven by lower-than-expected growth in the first quarter, with oil demand in OECD countries contracting by 70,000 barrels a day on year. European gasoil demand fell by 140,000 barrels a day in the quarter, also dragged by a declining share of diesel cars in the continent's fleet.
"The slump in the OECD contrasts with relatively resilient non-OECD demand of 1.2 million barrels a day year-on-year in both 1Q and 2024 on average, rendering global growth ever more dependent on emerging economies," the IEA said.
Wednesday's report comes as crude prices continue to trade rangebound after recently falling to levels last seen in mid-March. The international oil benchmark, Brent crude, currently trades around $82 a barrel, while the U.S. oil gauge, West Texas Intermediate, is around $78 a barrel.
The prospect of higher-for-longer U.S. interest rates due to sticky inflation weighs on sentiment, as higher rates typically damp demand for oil and make the dollar stronger. Meanwhile, traders factor in a reduced geopolitical risk premium as oil supplies haven't been significantly disrupted by the conflict in the Middle East so far.
The IEA raised its oil-demand growth forecast for next year to 1.2 million barrels a day from 1.1 million barrels a day previously, but said the estimates remain comparatively unchanged. Total demand is seen at an average of 104.3 million barrels a day.
Demand estimates are broadly in line with the macroeconomic outlook, according to the Paris-based organization, with global economic growth forecast at 2.9% this year and next, below the 2010-2019 average.
"Although the global economic outlook has improved since the end of last year as a soft-landing scenario has become the dominant view, stubbornly high inflation readings of late have caused investors to dial back their expectations for central bank interest rate cuts," the agency said.
The IEA's oil-demand projections continue to remain below the Organization of the Petroleum Exporting Countries', as the cartel forecasts global oil-demand growth of 2.2 million barrels a day this year and 1.8 million barrels a day the next.
Total oil supply is now seen at an average of 102.7 million barrels a day this year from previously 102.9 million barrels a day, while 2025 estimates remain unchanged at 104.5 million barrels a day on average. Last month, global supply was hit by lower Canadian output due to maintenance works and Russia carrying out some of its production cuts in line with OPEC+ quotas, the IEA said.
Non-OPEC+ countries are still set to lead global supply, the agency said, with production expected to grow by 1.4 million barrels a day this year and next. The IEA previously forecast growth of 1.6 million barrels a day for 2024. The U.S. is estimated to account for 45% of non-OPEC+ growth this year and 40% in 2025.
OPEC+ production is forecast to fall by 840,000 barrels a day this year--assuming that the group extends its voluntary output cuts-and to flip to a growth of 330,000 barrels a day in 2025 if the cuts stay in place.
Meanwhile, global refinery margins eased across all regions in April, as weaker-than-expected demand growth underpinned a collapse in middle distillate cracks and lower throughput levels, the IEA said. Annual growth in refinery activity is estimated at 1.8 million barrels a day in the second half of the year.
Global refinery output is forecast to rise to 83.4 million barrels a day this year, above the IEA's previous forecast due to stronger runs in OECD countries in the first quarter and better-than-anticipated Russian crude runs in March.
Russian crude exports fell by 450,000 barrels a day to 7.3 million barrels a day in April, with commercial revenues down 6.5% compared with the previous month to $17.2 billion, the agency said. Yet, proceeds from crude exports remained broadly stable as lower volumes were offset by higher prices.
Write to Giulia Petroni at giulia.petroni@wsj.com
(END) Dow Jones Newswires
05-15-24 0414ET
