OPEC Vs. IEA: Who To Believe On Oil Demand Forecasts? Oil prices firmed up slightly Thursday in the wake of the latest upward revision of 2024 crude demand growth by the International Energy Agency (IEA). The international Brent benchmark price was up by half a percent after IEA raised its growth estimate by 180,000 barrels per day (bpd) over the previous estimate of 1.1 million bpd announced December 16.
That December estimate, released within 48 hours of the conclusion of the COP28 conference in Dubai, represented a rise of 130,000 bpd over the agency’s original, low-ball estimate, which was issued as part of a report predicting that global crude oil demand would peak by 2030. The IEA has made something of a ritual in recent years of producing a low initial estimate for oil demand growth, and then following it up with a series of upwards revisions over the ensuing 12 months as demand remains stronger than it had expected. The agency has missed its initial estimate on the low side in 10 of the past 12 years and looks to be right on course to make it 11 of 13 years during 2024.
By contrast, the OPEC cartel of large crude exporting nations held firm on its demand growth estimate of 2.25 million bpd for 2024, also projecting strong demand growth for 2025 and beyond. The cartel’s Secretary General, Haitham Al Ghais, also slammed early projections of peak oil demand as being “misguided.”
“Ultimately, peak oil supply has never come to pass, and predictions of peak oil demand are following a similar trend,” Al Ghais said in a statement titled “A History of Unrealized Peaks,” published at the OPEC website. “Peak oil demand is not showing up in any reliable and robust short- and medium-term forecasts.”
Pointing to the fact that previous predictions of “peak oil” demand or supply have “repeatedly been moved further into the future, and at ever-higher levels,” Al Ghais attributed the 100% failed record of the theory to “mistaken assumptions on the size of the recoverable resource base, an underestimation of the impact of technology advancement, and the general resourcefulness of the industry.”
OPEC bases its projection on stronger global economic growth for 2024, estimating it will rise by 2.8%, as compared to 2.6% for 2023. By contrast, the IEA projects global economic growth to be cut in half in 2024 on a year-over-year basis. At the same time, though, the agency said its upward revision for demand growth is due to "a somewhat improved GDP outlook compared with last month's report. This applies especially to the U.S. where a soft landing is coming into view."
It goes without saying that both entities cannot be right. Unless, that is, the IEA continues to revise its projection upwards each month until it comes fully in-line with the OPEC view by October. Recent history indicates this outcome is not completely out of the question. But the current respective views of the two groups are sharply in contrast, and traders and investors seeking guidance are left to decide which to trust.
The Bottom Line
Some will claim that OPEC is biased because it has a vested interest in maintaining strong oil production and prices for decades to come. But it should also be pointed out that OPEC, unlike the IEA, has a business and profit motive for getting it right.
Contrast that to IEA’s forecasts, which all too often in recent years appear to be motivated more by supporting preferred narratives about the energy transition than to getting things right. This appearance of bias is supported by the agency’s consistent continuing need to publish revisions in its forecasts that always seem to proceed in the upwards direction.
I made my own position clear at the first of the year with my prediction of crude demand growth of between 2.0 and 2.5 million bpd for 2024. If nothing else, observing how this all evolves during the course of the year will be an interesting exercise.