Global Oil Demand Slows: IEA's Cautionary Forecast

Global Oil Demand Slows: IEA's Cautionary Forecast

Sofia Wu
2 min read

Global Oil Demand Slows Down, IEA Predicts Surplus Next Year

The International Energy Agency (IEA) has reported a notable deceleration in global oil demand growth. In the second quarter, demand increased by only 710,000 barrels per day, marking the smallest rise since late 2022. This slowdown is partly due to a slight decline in China's oil consumption as its post-pandemic recovery begins to taper off.

Despite oil prices remaining around $85 per barrel, the IEA forecasts potential market turbulence. They project that by the fourth quarter, global oil inventories will start to balance and may even transition into a surplus next year. This prediction is based on the deceleration in demand growth driven by modest economic expansion, improved oil efficiency, and the increasing adoption of electric vehicles.

There are differing opinions within the industry. While the IEA adopts a cautious stance, some trading houses and Wall Street banks remain bullish on oil consumption. Recent price increases, partly driven by reduced US crude inventories and heightened summer travel, have contributed to the optimism surrounding oil prices.

The IEA also notes that if OPEC+ does not increase production as planned, the market could still reach equilibrium in the fourth quarter. Overall, the outlook suggests a potential surplus in the coming year, presenting a mixed bag of insights.

Key Takeaways

  • Global oil demand growth slowed to 710,000 barrels/day in Q2, marking the weakest increase since late 2022.
  • The IEA projects a balance in global oil inventories by Q4 and a potential shift into surplus territory next year.
  • Long-term forecasts indicate a possible halt in global oil demand growth before the decade's end.
  • Despite the IEA's cautious demand growth forecast, oil prices remain near $85/barrel.
  • Recent data indicates a reduction of 3.4 million barrels in US crude inventories last week, supporting prices.


The IEA’s assessment of slowing global oil demand, influenced by economic lethargy, increased efficiency, and electrification, suggests a potential surplus by next year. This could impact oil-exporting nations and producers such as Saudi Arabia and Russia, potentially reducing revenue. Financial instruments linked to oil, including futures and ETFs, may experience increased volatility. In the short term, diminished Chinese demand and seasonal travel might stabilize prices. However, in the long run, the transition towards electric vehicles and energy efficiency could reduce oil's market dominance, prompting adjustments in global energy policies and investments.

Did You Know?

  • International Energy Agency (IEA):
    • Established in response to the 1973-1974 oil crisis, the IEA ensures reliable, affordable, and sustainable energy for its member countries and beyond. It provides analysis and policy recommendations on various energy issues, including oil, natural gas, and renewable sources, focusing on market analysis, energy security, and environmental awareness.
  • OPEC+:
    • This alliance between the Organization of the Petroleum Exporting Countries (OPEC) and several non-OPEC oil-producing nations, including Russia, aims to manage oil supply to stabilize the market and ensure equitable returns for oil producers and consumers.
  • Barrels per Day (bpd):
    • This unit of measurement quantifies the production, consumption, and transportation of petroleum products. One barrel per day equals 42 U.S. gallons or approximately 159 liters, facilitating standardized discussions and comparisons of daily oil-related activities.

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