- Tightening supplies and record demand have sent global crude oil prices up 15% since the start of July – and the International Energy Agency says they can continue to rise.
- Production cuts in Saudi Arabia contributed to a decline in global inventories, which are likely to fall for the fourth consecutive month in August.
- However, the International Energy Agency expects global demand growth to fall by more than half in 2024, which could provide relief from rising prices.
The International Energy Agency said today that declining global oil inventories, lower production by OPEC + members and record high demand may drive crude prices for the rest of the year.
But some relief for consumers hurt by recent hikes in oil and gasoline prices could loom in 2024.
The International Energy Agency said global oil demand reached an all-time high of 103 million barrels per day in June and August and could rise further in the coming months. That would bring average daily demand for 2023 to 102.2 million bpd, up 2.2 million from last year, and the highest annual level on record.
Stronger-than-expected use from China has contributed to demand growth this year, which has occurred as concerns about the global economy fade.
“The deepening of OPEC+ production cuts collided with improved macroeconomic sentiment and an all-time high global demand,” the International Energy Agency said in its monthly report, referring to global oil prices that jumped near 2023 highs last month.
However, the International Energy Agency expects demand growth to slow to 1 million barrels per day in 2024, down 150,000 from its previous forecast. The outlook points to a post-pandemic recovery that the IEA said has “largely run its course”, leading to slowing economic conditions, tightening fuel efficiency standards and an increased transition away from fossil fuels.
Brent crude prices have risen since the beginning of July as refiners try to keep up with rising summer demand.
That fuel demand sent U.S. gasoline prices up 8% in the past month to an average of $3.94 a gallon in the week ending Monday, the highest level in 10 months. Refiners have struggled to keep up with demand, especially as high temperatures have forced some to operate at lower levels.
However, the agency estimates that global refineries will produce 83.9 billion barrels per day in August, up 2.4 million barrels from May and 2.6 million barrels more than last summer’s peak.
Supplies are shrinking
Meanwhile, the IEA’s latest forecast comes after global oil supplies fell 910,000 barrels to 100.9 million barrels per day in July, supported by a sharp production cut from Saudi Arabia.
Global inventories fell 17.3 billion in June, with 115.4 million bpd below the five-year average. Preliminary data indicates inventories continued to decline, with August posting its fourth consecutive monthly decline.
Overall, global oil production is likely to rise by 1.5 million barrels per day this year, with US production making up 80% of that amount, according to the International Energy Agency. But the increase still follows global demand growth expected this year by 700,000 barrels.