For the first time in its existence, the IEA is going to be right about oil demand being weak this year.
OPEC's optimistic oil demand assumptions are at odds with reality, with a 2.1 million b/d difference compared to IEA estimates for 2025.
Global oil inventories and refining margins indicate weaker demand than OPEC predicts, likely leading to an extension of production cuts into Q1 2025.
Speculation suggests that if OPEC+ extends production cuts into Q1 2025, coupled with geopolitical events, oil prices could see a significant increase.
Flags of OPEC Plus countries, 23 countries
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There's a massive disconnect between what OPEC thinks global oil demand is doing and what reality is. For the first time in its existence, the IEA is going to be right about oil demand being weak this year.
OPEC oil demand assumption vs. IEA
demand
OPEC, IEA
Now there's an important differentiator here. We've long criticized IEA for its "evasive" oil demand increase methods. One such method they have used in the past is increasing oil demand from the previous year without changing the year-over-year demand growth. On the surface, oil demand growth year over year will look weak, but on an absolute level, it has increased.
So while it's fair to criticize the IEA for its evasive tactics, what's true this time around is that OPEC is likely far too optimistic about its demand assumptions, and the IEA is probably more right than wrong.
As you can see in the comparison chart above, the difference in demand estimate between IEA and OPEC in 2025 is a staggering 2.1 million b/d. This delta effectively explains why OPEC sees the need to increase its oil production versus IEA's call for a bloated market even if the current cut exists.
In the years I've followed the oil market, I have never seen such a large disconnect in oil demand estimates for the incoming year. And there are major implications for the oil market and what OPEC has to do next.