In an evaluation that will puncture the COP28 balloon, the International Energy Agency (IEA) has said that world oil demand will actually rise faster than expected next year.
The prognosis is a clear suggestion that fossil fuel use remains at the centre of global energy use, despite the historic agreement reached at COP28 this week to transition away from fossil fuels.
According to the report: “US oil supply growth continues to defy expectations, with output shattering the 20 mb/d mark. This, combined with record Brazilian and Guyanese production along with surging Iranian flows will lift world output by 1.8 mb/d to 101.9 mb/d in 2023. Non-OPEC+ will again drive global gains in 2024, projected at 1.2 mb/d after OPEC+ deepens its voluntary oil cuts.”
The 2024 revision reflects “a somewhat improved GDP outlook compared with last month’s report,” the IEA said. “This applies especially to the US where a soft landing is coming into view.” It added that falling oil prices act as an additional boost to oil consumption.
For the first time this year’s COP28 deal, known as the Global Stocktake Agreement, directly addresses the use of fossil fuels, a key demand from many countries at this year’s talks. It calls on countries to “transition away” from fossil fuels “in this critical decade”.
However, the report from the IEA would suggest that such a transition will be far from clear- cut.
Looking more widely, the IEA said that he shift in global oil supply from key producers in the Middle East to the United States and other Atlantic Basin countries, and the dominant impact of China and its booming petrochemical sector on oil demand, are profoundly impacting global oil trade.
It added that East of Suez markets have already absorbed the majority of Russian flows following the invasion of Ukraine as well as rising Iranian exports, but now must adjust to increasing volumes of Atlantic Basin crude and NGLs. The continued rise in output and slowing demand growth will complicate efforts by key producers to defend their market share and maintain elevated oil prices, it said.