IEA squeezed its oil demand outlook to 1.1 million bpd due to weak demand from developed countries

The International Energy Agency (IEA) said on Wednesday that it had reduced its growth prediction by 140,000 barrels per day (bpd) from its assessment last month and now expects global oil demand growth to be just 1.1 million bpd this year, as a result of weak first-quarter consumption in developed economies.

The OECD's oil demand in the first quarter shrunk due to sluggish deliveries of middle distillates from the US and Europe, according to the agency, whose demand growth forecast is now less than half of what OPEC anticipates for this year.

According to the IEA's monthly Oil Market Report released Wednesday, the growth in oil demand in 2025 is expected to be approximately 1.2 million bpd, which is almost unchanged from last month's estimate.

Demand dynamics

This year's gasoil consumption has been severely hindered by weak industrial activity and another mild winter, especially in Europe, where gasoil consumption decreased in the first quarter compared to the previous year.

“Combined with weak diesel deliveries in the United States at the start of the year, this was enough to tip OECD oil demand in the first quarter back into contraction,” the Paris-based agency said in its report.

The IEA also mentioned that additional stock buildings were seen in April according to early data, as onshore inventories surged following an oil on water spill.

“Increasing trade dislocations had pushed oil on water to a post-pandemic high in March, while onshore stocks were at their lowest since at least 2016. A return to historical average stock levels will be key to avoid renewed market volatility,” the IEA said.

The IEA's revised downward estimate for the world's oil demand widens the forecast discrepancy with OPEC, who projects an optimistic 2.25 million barrels per day growth in global oil demand this year. Meanwhile, the agency projects half that amount.

OPEC maintained earlier this week that strong oil demand will persist in 2024 and 2025, citing early-year global economic strength and further upside possibilities from probable loosening of monetary policy. This assessment was unchanged from last month. OPEC stuck to its prediction from the April report, predicting an increase in global oil demand of 2.25 million barrels per day this year and 1.85 million barrels per day the next year.