IEA slightly lifts oil demand outlook, says supply surplus narrowing

The Paris-based organization now estimates global demand to grow by 1.1 million barrels a day this year from 1.05 million barrels a day previously, reaching a total of 104 million barrels a day on average.

Growth this year is expected to exceed last year’s but to remain below the 2023 level of over 2 million barrels a day. The agency’s projections are also substantially lower than OPEC’s, as the cartel currently expects demand to grow by 1.45 million barrels a day.

Last year’s demand growth was reassessed at 870,000 barrels a day from previous projections of 940,000 barrels a day.

Global demand will still be led by China despite a marked slowdown in the country’s pace of expansion, with its share of the global increase slumping to 19% from 60% in the preceding decade.

Chinese oil demand returned to growth in the fourth quarter of last year, even though the increase was entirely driven by the petrochemical sector. “In a sign of the structural shifts reshaping Chinese oil demand, use of the three most important fuel products–gasoline, jet/kerosene and gasoil–declined marginally in 2024," the agency said. “This strongly suggests that fuel use in the country has already reached a plateau and may even have passed its peak."

Thursday’s IEA report comes as Brent crude trades around $74 a barrel, while the U.S. oil gauge, West Texas Intermediate, is around $70 a barrel.

Crude futures settled more than 2% lower in the previous trading session after U.S. President Trump said he and Russian President Vladimir Putin agreed to open immediate talks to end the war in Ukraine. Oil is also pressured by a larger-than-expected build in U.S. crude stockpiles and fears that escalating trade tensions could hurt global growth and demand.

Meanwhile, “improved OPEC+ compliance with agreed targets is slowly chipping away at this year’s projected supply surplus," the IEA said.

OPEC+ crude supply fell by 280,000 barrels a day, while January production from OPEC’s 12 members plunged by 480,000 barrels a day, according to the agency’s estimates. The OPEC+ alliance–which pumps more than half of the world’s crude oil–has been withholding barrels for more than two years and is now set to gradually raise output from April.

Russia’s crude supply rose 100,000 barrels a day in January despite Western sanctions and Ukraine’s drone attacks against energy infrastructure.

“Fresh U.S. sanctions on Russia and Iran roiled markets at the start of the year but they have yet to materially impact global oil supply," the IEA said. “Iranian crude oil exports are only marginally lower while Russian flows, so far, continue largely unaffected."

Still, the IEA cut the Kremlin’s supply projections for this year by 150,000 barrels a day compared to its previous forecast.

Global oil supply fell by 950,000 barrels a day in January as a result of colder weather hitting North American supply and output declines in Libya and Nigeria. Total supply growth is now forecast at 1.6 million barrels a day for the year from 1.8 million barrels a day previously.

Non-OPEC+ producers are expected to add 1.4 million barrels a day of supply, while OPEC+ will register a modest increase of 140,000 barrels a day.

“It is still too early to tell how trade flows will respond to new U.S. tariffs or the prospect thereof, and what the impact of the escalation of sanctions on Iran and Russia may be in the longer run," the IEA said.

Write to Giulia Petroni at giulia.petroni@wsj.com