The International Energy Agency (IEA) has revised its oil demand forecast for 2023, citing ongoing economic challenges in affluent countries. In a recent statement, the IEA noted that global demand for oil will grow at a slower pace than initially predicted, increasing by 2.2 million barrels per day (bpd) to reach an average of 102.1 million bpd. This figure is approximately 220,000 barrels lower than the agency’s previous forecast.
The IEA pointed to the challenging economic environment as a key factor affecting oil demand. It specifically highlighted the tightening of monetary policy and the grinding slowdown in industrial activity in the Organization for Economic Co-operation and Development (OECD) and Europe as significant contributors to the decline in demand. The agency emphasized that wealthy countries are particularly feeling the weight of the worsening economic conditions.
Within the EU, demand remains suppressed due to a manufacturing downturn, while wealthy OECD economies are forecasted to experience four consecutive quarters of contracting demand until the end of 2023. The IEA stated that persistent macroeconomic headwinds, evident in the deepening manufacturing slump, have led to a downward revision of the 2023 growth estimate, marking the first reduction this year.
China is expected to be the main driver of demand growth, accounting for 70% of the overall increase as it expands its use of petrochemicals. Looking ahead to 2024, the IEA anticipates a further deceleration in fuel demand growth, estimating an increase of only 1.1 million bpd. This slowdown is attributed to a loss of momentum in the global economic recovery and increased adoption of electric vehicles and efficiency measures in vehicle fleets.
The revised forecast by the IEA underscores the impact of economic challenges on the oil market, particularly in wealthy countries. The contraction in demand experienced by manufacturing-dependent economies in the EU highlights the degree to which industrial activity influences oil consumption. As economies continue to grapple with persistent macroeconomic headwinds, it remains to be seen how it will further impact global oil demand.
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