• 3 minutes e-car sales collapse
  • 6 minutes America Is Exceptional in Its Political Divide
  • 11 minutes Perovskites, a ‘dirt cheap’ alternative to silicon, just got a lot more efficient
  • 2 hours GREEN NEW DEAL = BLIZZARD OF LIES
  • 21 hours Could Someone Give Me Insights on the Future of Renewable Energy?
  • 21 hours How Far Have We Really Gotten With Alternative Energy
  • 22 hours The United States produced more crude oil than any nation, at any time.
  • 5 hours Bankruptcy in the Industry
  • 21 hours "What’s In Store For Europe In 2023?" By the CIA (aka RFE/RL as a ruse to deceive readers)
IEA Cuts 2024 Oil Demand Growth Forecast

IEA Cuts 2024 Oil Demand Growth Forecast

Global oil demand growth is…

Ecopetrol, Guerillas and Death Squads: The War for Colombia’s Oil

Ecopetrol, Guerillas and Death Squads: The War for Colombia’s Oil

Colombia’s national oil company, Ecopetrol,…

Irina Slav

Irina Slav

Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.

More Info

Premium Content

IEA, OPEC Divergence on Oil Demand Becomes Too Big To Ignore

  • Reuters this week reported that the divergence between IEA and OPEC demand numbers is the largest in 16 years.
  • The IEA predicted last year that oil demand would peak before 2030.
  • OPEC has a vested interest in stronger global demand, so there may well be an overestimation bias in its outlooks.
Tanker

Ever since the International Energy Agency switched from a pure-play information provider to an advocate of the energy transition, its forecasts about oil demand have shifted to increasingly reflect this advocacy.

This has led to a growing divergence between the IEA's and OPEC's outlooks on the future of the commodity, increasing the risk of confusion among analysts and investors. The question "Who's right?" has become a legitimate one.

To begin with, it's worth noting that neither authority is completely impartial. OPEC has a vested interest in stronger global demand, so there may well be an overestimation bias in its outlooks.

The IEA, on the other hand, acts like it has a vested interest in the energy transition, which has led it to regularly underestimate oil demand, with its most marked departure from reality to date contained in the original Net Zero Roadmap.

The document came out in May 2021. In that report, the IEA said there was no need for new oil and gas exploration as of that year because the energy transition was moving fast enough to make that redundant. But did not take long for the IEA to revise its view. In November of that same year, the agency called for more investment in new oil and gas exploration amid a risk of a supply shortage.

Last year, the IEA began the year by forecasting oil demand growth at 1.9 million barrels daily. Over the next 11 months, it kept revising this, to end the year at 2.3 million bpd in global demand growth—a view it held over January this year as well, and a figure very close to OPEC's forecasts during the year that all saw demand growing by over 2 million barrels daily. Related: Europe’s Secret Weapon In Its Energy War With Russia

Reuters this week reported that the divergence between IEA and OPEC demand numbers is the largest in 16 years, based on the analysis of data going back to 2008. This divergence concerns the February oil demand forecasts of the two organizations, and the gap is indeed considerable, at over 1 million bpd.

In its February Oil Market Report, the IEA forecast oil demand growth at a modest 1.2 million barrels daily this year, citing a deceleration in demand recovery after the pandemic lockdowns. OPEC, for its part, kept its 2024 oil demand growth forecast unchanged from previous months at 2.2 million bpd.

There is also divergence over the longer-term prospects for oil demand, with the IEA last year predicting that it would peak before 2030, along with natural gas demand and coal demand. This prediction seems to have been the last drop for OPEC, which reacted with a sharp warning to the IEA to stop politicizing energy, accusing it of cheerleading for the energy transition and letting this affect the accuracy of its forecasts.

"The IEA has a very strong perception that the energy transition will move ahead at a much faster pace," a former official at the agency told Reuters.

"Both agencies have boxed themselves in with a position, which is why they have this enormous gulf in demand forecasts," Neil Atkinson, former head of the agency's oil markets division explained.

Some form of bias is almost unavoidable when it comes to predicting oil demand, and this is precisely because of the massive push for a transition that has seen a lot of money funneled into climate advocacy organizations that, among their advocacy activity, also deal in forecasting.

ADVERTISEMENT

In itself, this bias is not a problem as long as the users of that information are aware of it. It becomes a problem, however, when biased forecasts begin to be shared and amplified, painting a distorted picture of, in this case, oil demand growth prospects and affecting investment decisions.

By Irina Slav for Oilprice.com

More Top Reads From Oilprice.com:


Download The Free Oilprice App Today

Back to homepage





Leave a comment
  • fredric longabard on March 13 2024 said:
    OPEC livelihood depends on accurate forecasts IEC being political does not.
  • Mamdouh Salameh on March 13 2024 said:
    Despite having vested interest in growing global oil demand, OPEC has had a superb track record of credibility and success in its projections over the years the latest of which was in January 2023 when it projected that oil demand will grow by 2.3 million barrels a day (mbd) and it has been proved absolutely right. The reason for its projection successes is its profound knowledge of market trends and its dedication to the stability of the market and prices away from politics.

    On the other hand , the International Energy Agency (IEA) which was originally established as an energy information provider morphed into an advocate of energy transition. That is why its demand projections were based on flawed assumptions and were politically-motivated aimed at supporting energy transition. Cases in point are its claim at the height of the Pandemic in 2020 when demand had virtually collapsed that peak oil demand is now behind us. Another case is its call in 2021 for an immediate halt to new investments in oil and gas which was proven so embarrassing that it was forced to withdraw it but not before it unmasked a high level of stupidity and lack of vision. Now the IEA is projecting a peak oil demand before 2030 based on the very flawed assumption that EV sale will cause a steep decline in global oil demand thus hastening peak oil demand before the 2030. It has already proven wrong about the number of EVs on the roads. Another case in point is that the IEA is forecasting a demand growth of only 1.2 mbd in 2024 when OPEC is forecasting 2.2 mbd in 2024 and 1.8 mbd by 2025. There is not an iota of doubt that OPEC will prove right.

    The IEA has become known in the world for its biased energy data aimed at depressing oil prices and creating false impressions about glut in the market and a slowdown in demand for the purpose of primarily serving Western members in the OECD. That is one reason why OPEC stopped five years ago using any IEA energy data as biased, inaccurate and politically-motivated.

    On balance, OPEC wins the projection game overwhelmingly with a long and well established record of success while the IEA continues to manufacture data aimed at promoting energy transition,

    Dr Mamdouh G Salameh
    International Oil Economist
    Global Energy Expert

Leave a comment




EXXON Mobil -0.35
Open57.81 Trading Vol.6.96M Previous Vol.241.7B
BUY 57.15
Sell 57.00
Oilprice - The No. 1 Source for Oil & Energy News