Oil & Gas

The divergence between OPEC and the International Energy Agency (IEA) regarding global oil demand forecasts has become increasingly pronounced, particularly since the onset of the pandemic. While OPEC projects that global oil demand will grow by over 2 million barrels per day (bpd) this year, the IEA offers a starkly contrasting estimate of just under 1 million bpd. This 1.1 million bpd gap underscores the different assumptions each organization makes about key drivers of demand, particularly in light of slowing growth in China, which has been a cornerstone of global oil consumption for the last two decades.

OPEC’s initial optimism regarding China's demand led it to predict robust growth figures earlier in the year. However, recent revisions have tempered these expectations, reflecting disappointing consumption data and an anticipated slowdown in Chinese economic activity. The IEA, on the other hand, has consistently lowered its forecasts throughout the year, with its latest assessment attributing the lack of demand growth to a significant contraction in Chinese consumption, which has declined for several consecutive months. As of mid-2024, the IEA anticipates only a modest increase of 180,000 bpd in Chinese oil demand, a fraction of the figures seen in prior years.

The long-term projections of both entities further illustrate their differences. The IEA has maintained that global oil demand will peak by 2030, primarily due to shifts in China’s economic landscape and increasing adoption of alternative energy vehicles. The agency's latest report highlights a trend towards reduced oil consumption as the country grapples with an economic slowdown and transitions to cleaner energy sources. In contrast, OPEC rejects the notion of peak oil demand within the next few decades, projecting that global oil demand will continue to grow, reaching over 120 million bpd by 2050. OPEC describes the IEA's forecasts as overly pessimistic and disconnected from market realities.

This growing chasm between OPEC and the IEA poses significant implications for the future of global energy policy and market dynamics. With only a few months left in 2024, such divergent views are unusual, given that the two organizations have rarely been more than 350,000 bpd apart in their projections at this time of year over the last decade. As the world navigates the complexities of energy transition and demand fluctuations, the contrasting forecasts from these influential bodies underscore the uncertainty surrounding future oil consumption patterns and the broader energy landscape.