The International Energy Agency says shipping disruptions provide a short-term boost to the oil market with demand at 1.3 million barrels per day.
Global oil demand is forecast to grow more than expected due to the rising fuel needs of ships rerouted away from the Red Sea amid attacks by Yemen’s Houthi rebels and a brighter economic outlook in the United States, the International Energy Agency (IEA) has said.
In its monthly oil report released on Thursday, the Paris-based agency made a 110,000 barrels per day (bpd) upward revision of global oil demand from its previous forecast as attacks by Yemen’s Iran-aligned Houthis in the Red Sea delay supplies.
The IEA said world oil demand is now forecast to increase by 1.3 million bpd this year.
“Disruptions to international trade routes in the wake of turmoil in the Red Sea are lengthening shipping distances and leading to faster vessel speeds, increasing bunker demand,” the agency said, using a term for the fuel needs of ships.
The Houthis have repeatedly launched drones and missiles against international commercial shipping since mid-November over Israel’s war on Gaza, disrupting global commerce along a route that accounts for about 15 percent of the world’s shipping traffic, forcing firms to reroute to longer and more expensive journeys around Southern Africa.
The disruptions have meant that nearly 1.9 billion barrels of oil were at sea at the end of last month, the IEA said, nearly the highest since the COVID pandemic.
Longer routes boosted fuel demand and the loading of ships with fuel in Singapore reached all-time highs.
But the agency warned that the settling down of the post-pandemic turbulence and a cloudy economic outlook will weigh on demand, even as shipping disruptions provide a short-term boost.
“The global economic slowdown acts as an additional headwind to oil use, as do improving vehicle efficiencies and expanding electric vehicle fleets,” it said.
“Growth will continue to be heavily skewed towards non-OECD [Organisation for Economic Co-operation and Development] countries, even as China’s dominance gradually fades. The latter’s oil demand growth is expected to slow from 1.7 million bpd in 2023 to 620,000 bpd in 2024,” the IEA said.
The annual growth in demand remains sharply lower than in 2023 when it reached 2.3 million bpd, on the back of energy efficiency gains and the use of electric vehicles.
Total demand is forecast to reach 103.2 million bpd in 2024 compared with 101.8 million bpd last year.
Should the producer bloc OPEC+ maintain voluntary cuts through 2024, the IEA said it sees the market in slight deficit rather than surplus, adding oil prices were rangebound in early March after the market priced in its last cut announcement.
Oil supply growth from non-OPEC+ countries oil will continue to significantly eclipse oil demand expansion, the IEA added.
Following the report, oil prices extended gains on Thursday.
Brent crude futures LCOc1 for May rose 72 cents, or 0.86 percent, to $84.75 a barrel by 10:21 GMT. US West Texas Intermediate (WTI) crude for April was up 83 cents, or 1.04 percent, at $80.55.
“Whilst the IEA’s view on global oil balance is still more than a country mile away from OPEC’s prognosis, this report does nothing to dent the developing upbeat mood,” said analyst Tamas Varga at PVM Oil Associates.
