Global Oil Prices Could Keep Heading Higher, IEA Says

Declining global oil inventories, reduced production from OPEC+ members and record-high demand could drive crude prices for the rest of the year, the International Energy Agency said today.

But some relief for consumers pinched by the recent surge in oil and gasoline prices might be on the horizon in 2024.

World oil demand reached an all-time high of 103 million barrels per day in both June and August and may increase further in coming months, IEA said. That should push average daily demand for 2023 to 102.2 million barrels per day, up 2.2 million from a year ago and the highest annual level ever.

Stronger-than-expected usage from China has contributed to this year’s demand growth, which has occurred as concerns about the global economy have faded.

“Deepening OPEC+ supply cuts have collided with improved macroeconomic sentiment and all-time high world demand,” IEA said in its monthly report, noting global oil prices that have surged near 2023 highs in the past month.

IEA predicts, however, demand growth will slow to 1 million barrels per day in 2024, down 150,000 from its previous forecast. The forecast accounts for a post-pandemic recovery that IEA said has “largely run its course,” slowing economic conditions, tighter fuel efficiency standards and increased transition away from fossil fuels.

Summer Surge

Brent prices have increased since the beginning of July as refiners have tried to keep up with summer driving demand.

That demand for fuel has driven U.S. gasoline prices up 8% in the past month to an average of $3.94 per gallon for the week ended Monday, the highest in 10 months. Refiners have struggled to keep pace with demand, particularly as high temperatures have forced some to operate at reduced levels.

Still, the agency estimates 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 Shrink

At the same time, IEA’s latest forecast comes after global oil supply fell 910,000 barrels to 100.9 million barrels per day in July, fed by a sharp reduction in output from Saudi Arabia.

Global inventories fell 17.3 billion in June, with industry stocks 115.4 million barrels per day below the five-year average. Preliminary data indicate inventories have continued falling, with August marking the fourth straight monthly decline.

Overall, global oil output likely will rise by 1.5 million barrels per day this year, with U.S. production composing 80% of that amount, IEA said. But the increase still trails this year’s anticipated world demand growth by 700,000 barrels.