The International Energy Agency (IEA) has released its first monthly oil market report of the year, projecting a considerably sufficient global oil supply for 2024, contradicting the previous day's prediction of supply tension by OPEC. The report attributes the ample supply to rising production in regions outside OPEC+, especially with increased outputs from the United States, Canada, Brazil, and Guyana. Consequently, the IEA has raised its non-OPEC supply growth estimate by about 25% to 1.5 million barrels per day.
In contrast to OPEC's prediction, the IEA foresees a nearly 50% slowdown in global fuel consumption growth due to macroeconomic headwinds and the growing popularity of electric vehicles, leading to an increase of only 1.2 million barrels per day. With a substantial slowdown in demand, the report anticipates potential oversupply from the second quarter to the end of the year.
The IEA's report also highlights that global oil inventories grew in the last quarter of the previous year, contrary to the anticipated contraction, further dampening bullish sentiment in the oil market. However, the agency warns of the continued high risk of disruptions in the Suez Canal oil transit, which accounts for about 10% of the world's maritime oil trade.
While IEA and OPEC are two of the most crucial forecasting bodies in the global oil market, their contrasting reports reflect a long-standing divergence in views. IEA's latest prediction of a comfortable and balanced oil market this year, despite tensions in the Middle East, starkly differs from OPEC's expectation of strong demand growth driven by China's and the global economy's recovery.
The IEA, serving oil-consuming nations, often finds itself at odds with OPEC, which is comprised of oil-producing countries. Over the past year, OPEC's predictions for oil demand growth in 2024 have consistently been more optimistic than those of the IEA. The contrasting views have led to multiple clashes over long-term oil demand prospects and oil supply issues.
IEA Executive Director Fatih Birol also downplayed the impact of the crisis in the Red Sea on oil prices, suggesting that the oil market would remain comfortable and balanced this year unless there are significant geopolitical surprises. Birol asserted that oil production has not been affected by Houthi attacks on cargo ships or the Israel-Palestine conflict and anticipated no major changes in oil prices as there is sufficient oil entering the market.
