The International Energy Agency (IEA) has revised its 2024 oil demand growth projection, factoring in sluggish OECD (Organization for Economic Co-operation and Development) deliveries, a complete post-COVID-19 rebound, and an expanding electric vehicle (EV) fleet.
Weakening Demand and Electric Vehicle Surge
In its latest monthly oil market report, the IEA reduced its 2024 oil demand growth forecast by approximately 100,000 barrels per day (bpd), now estimating it at 1.2 million bpd. The agency anticipates a further deceleration to 1.1 million bpd in 2026 due to the conclusion of the post-COVID-19 rebound.
Toril Bosoni, head of the IEA’s oil industry and markets division, noted a significant surge in EV sales, particularly in China and Europe, as a contributing factor to decreasing gasoline demand. “EV sales and enhanced fuel efficiency in the automobile fleet are dampening gasoline demand, particularly in advanced economies, especially China,” Bosoni stated.
Heightened Middle East Tensions and Supply Security Concerns
The IEA’s report emerges amidst concerns over potential oil supply disruptions in the Middle East, with rising diplomatic tensions. Iran has threatened retaliation for an alleged Israeli bombing of its embassy in Damascus. The Israeli-Hamas conflict further intensifies regional instability, adding to the uncertainty surrounding energy security.
Brent crude futures for June delivery traded 1% higher at .62 per barrel, while US West Texas Intermediate futures for May delivery gained 1.2% to trade at .07 per barrel. The escalating geopolitical risks could significantly impact the oil market.
“We’re closely monitoring the Middle East situation, particularly the tanker attacks in the Red Sea. Additionally, we’re observing the tensions between Iran and Israel. The ongoing Russian-Ukrainian conflict and the attacks on Russian refineries also concern us,” Bosoni said. “These tensions pose potential risks to the oil market, creating potential for major implications should any significant outages occur.”
Data sourced from: cnbc.com
