American Oil and Gas Reporter - May 2024 - 53

IER: Wishful Thinking Influences IEA
WASHINGTON-The International
Energy Agency has hiked its expectations
for 2024 oil demand four times since
November, the Institute for Energy Research
observes, and that is because wishful
thinking about what it hopes will happen,
instead of clear-eyed recognition of
reality, skews the agency's projections,
the think tank suggests.
After all, IER points out, even after
so many upward revisions, IEA's oil demand
growth projection of 1.3 million
barrels a day still lags nearly 1 MMbbl/d
behind that of the Organization of Petroleum
Exporting Countries. " Both
OPEC and IEA have differed regarding
the long-term oil demand outlook and
the need for investment in new oil
supply, " IER notes.
IEA data shows that 2023 oil demand
rose 2.3 MMbbl/d, IER observes, but the
agency insists 2024 demand growth should
ease after years of post-pandemic unpredictability.
Meanwhile, the think tank
notes, although the U.S. Energy Information
Administration's 1.43 MMbbl/d
growth prediction for the year is closer
to IEA's calculation than OPEC's, IER
points out that EIA also acknowledges
extended production cuts from OPECplus
will translate into a tighter supply
balance and stronger prices.
Although IEA's supply considerations
now acknowledge uncertainties such as
Red Sea region shipping disruptions,
IER notes that IEA continues to insist
the economy is likely to restrain demand
growth. Moreover, the think tank says,
IEA projections continue to attribute
most of that growth to countries outside
the Organization for Economic Cooperation
& Development, even as IEA
also foresees Chinese demand dropping
more than 1 MMbbl/d.
" But right now, markets are saying
that demand for oil is growing at a healthy
pace, but not supply, "
IER constrasts.
" If this continues, there could be a shortage
down the road. The White House will
probably blame OPEC and 'Big Oil' for
it, as it has done before, should it occur. "
With OPEC-plus extending its oil production
cuts, EIA has reduced its forecast
for 2024 global production growth, IER
notes, which means significant global inventory
declines in the second quarter.
" Because of falling inventories, EIA
expects the Brent oil spot price will average
$88 per barrel in the second quarter
of 2024 and average $87 per barrel in
2024, " the think tank says. " With those
forecasted oil prices, EIA is projecting
that the U.S. average retail gasoline price
will average about $3.50 per gallon this
year, about the same average price as
last year, and over a dollar more than
when President Biden took the oath of
office. Despite averaging about the same
price as last year, EIA expects that nominal
gasoline prices from May through
July will exceed prices for those same
months in 2023. "
Ultimately, the think tank concludes,
Chinese demand is key. " In 2023, China
was recovering from Covid lockdowns
and pushed oil demand up, " IER recounts.
" IEA expects growth in oil demand from
China to slow this year, lowing the increase
in global oil demand growth to
1.3 MMbbl/d 2024 from 2.3 MMbbl/d
in 2023. "
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MAY 2024 53
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American Oil and Gas Reporter - May 2024

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