What Investors Should Note From IEA's Latest Oil Market Report

In This Article:

Key Takeaways

  • The International Energy Agency says global oil supply is increasing, while demand is slowing.

  • Stocks like EOG, XOM and DVN stand to benefit from the slowdown of energy demand.

  • Register now to see our 7 Best Stocks for the Next 30 Days report - free today!

The latest report from the International Energy Agency (“IEA”) reveals significant shifts in the global oil market. Supply is increasing, but demand growth is slowing, with projections of a surplus by 2025. The report highlights how economic uncertainties, changing energy preferences, and global events are shaping the market.

Despite a cautious tone, the IEA’s report suggests that there are key opportunities in oil-focused investments, particularly as demand-supply imbalances create room for strategic gains.

Those interested in the sector could benefit from focusing on resilient stocks like EOG Resources EOG, ExxonMobil XOM and Devon Energy DVN.

Supply Rises While Demand Slows

According to the IEA, global oil demand is expected to grow by 920,000 barrels per day (bpd) in 2024 and 990,000 bpd in 2025. This is a noticeable slowdown compared to the strong recovery after the pandemic. A major factor is China, the world’s largest oil importer, where demand growth is projected to drop significantly—from 1.4 million bpd in 2023 to just 140,000 bpd in 2024.

On the other hand, oil supply is increasing. Countries outside the OPEC+ group, such as the United States, Canada, Guyana and Argentina, are expected to add 1.5 million bpd annually over the next two years. This growth could lead to a surplus of over 1 million bpd by 2025, even if OPEC+ continues its production cuts.

Different Views: IEA vs. OPEC

The IEA’s cautious outlook differs from OPEC’s more optimistic predictions. While the IEA expects demand growth to stay below 1 million bpd in 2024 and 2025, OPEC forecasts growth of 1.82 million bpd in 2024 and 1.54 million bpd in 2025.

OPEC has adjusted its forecast downward for four straight months, moving closer to the IEA’s perspective. However, it still anticipates stronger demand than the IEA, indicating differing views on economic recovery and a shift to cleaner energy.

Pressures From Clean Energy and Economic Trends

The IEA notes that the rise of clean energy technologies and the global push for renewable energy are steadily reducing oil demand, especially in transportation and power generation. Weak economic conditions and the end of post-pandemic demand surges are further slowing growth.

That said, there’s a silver lining. Demand for diesel and gasoil in OECD countries has been stronger than expected, prompting the IEA to revise its 2024 forecast upward by 60,000 bpd.

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