IEA warns of significant oversupply in the oil market next year – Commerzbank

In its monthly report, the International Energy Agency (IEA) painted a bleak picture for oil demand, notes Carsten Fritsch, commodities analyst at Commerzbank.

China will see demand rise to 180,000 bpd in 2024

“In the first half of the year it was up only 800,000 barrels per day from the previous year. This is only a third of the growth seen in the previous year. For the full year, the IEA expects demand to increase by 900,000 barrels per day. In July, China’s oil demand fell year-on-year for the fourth month in a row.”

“The IEA now expects China to see demand growth of 180,000 barrels per day in 2024. The growth engine China has thus become a drag on growth. For next year, the AIE expects only a slight acceleration. Global oil demand is expected to increase by 950 thousand barrels per day, and demand from China increases by 260 thousand barrels per day. This means that global demand growth would lag behind the IEA’s expected increase in non-OPEC oil supply.”

“As a result, OPEC oil demand will fall to an average of 26.2 million barrels per day next year. That’s 1 million barrels per day less than OPEC’s current production. Therefore, OPEC should cut supply next year to avoid a surplus. The gradual increase in production that has been planned so far would result in a considerable oversupply.”