Lower growth in crude oil demand according to the IEA: What impact will it have on prices?

The International Energy Agency (IEA) has presented its new forecasts on the oil market in its monthly report, highlighting a lower growth in demand for 2024. According to the report, a global demand increase of 1.1 million barrels per day is expected in 2024, representing a decrease of 140,000 barrels compared to the previous forecast, reaching 103.2 million barrels. For the year 2025, the IEA estimates a slightly higher growth, reaching 104.5 million barrels per day, suggesting an upward trend in global oil demand despite the slight reduction forecasted for the following year. The report emphasizes that the increase in oil demand continues to be concentrated in emerging countries, with China being one of the main drivers of this growth. On the other hand, a decrease in demand from OECD countries is expected, with an estimated drop of 137,000 barrels in 2024, mainly due to the 140,000 barrel reduction in Europe. A highlighted aspect in the report is the decline in diesel consumption in Europe, expected to be 9.3% lower in 2024 compared to levels recorded in 2019. This is attributed to various factors such as the decrease in industrial activity, the fall in sales of vehicles with diesel engines, and the mild winter conditions of the past winter. Regarding oil supply, it is expected to reach a record of 102.7 million barrels per day this year, with an increase mainly driven by non-OECD member or allied countries such as the United States, Canada, and Brazil. This contrasts with the production freeze in OPEC cartel member countries. OPEC and its allies' (OPEC+) crude oil production experienced a decrease in April, reaching 41.43 million barrels per day, mainly due to extraction cuts applied by Russia. This country reduced its production by 150,000 barrels per day in April, reaching 9.3 million barrels per day. As for oil prices, Brent experienced a one-dollar per barrel increase in April, reaching US$ 88, amid persistent tension in the Middle East, with missile exchanges between Israel and Iran, as well as attacks by Yemen's Houthis on merchant ships beyond the Red Sea. Despite these events causing uncertainty in the market, crude oil prices moderated towards the end of April, reaching US$ 93 per barrel, due to the perception that there would not be an escalation in the confrontation between Iran and Israel. This downward trend continued in the early days of May, with a further decrease of US$ 4 per barrel, also influenced by doubts about the evolution of the global economy. In summary, the IEA's projections show a scenario of lower growth in oil demand for the coming years, with an increase focused on emerging countries and a decrease in demand from OECD countries, while oil supply continues to be mainly driven by non-OPEC producers. Crude oil prices have experienced fluctuations amid geopolitical tensions but are also affected by constantly evolving global economic conditions.