Paris: The International Energy Agency (IEA) has said that global oil demand will surpass expectations due to the Red Sea crisis.
According to the Paris-based agency, the rising fuel needs of the ships were rerouted away from the Red Sea amid attacks by Yemen’s Houthi rebels and a positive economic outlook in the United States.
In the IEA’s monthly oil report, global oil demand increased by 110,000 barrels per day (BPD) following an offensive by Yemen’s pro-Iranian Houthis in the Red Sea. The IEA said that it expected global oil demand to rise by 1.3 million BPD this year.
The agency remarked that, “Disruptions to international trade routes in the wake of turmoil in the Red Sea are lengthening shipping distances and leading to faster vessel speeds, increasing bunker demand.”
Since mid-November, the Houthis repeatedly launched drones and missiles against international commercial shipping following Israel’s war on Gaza. It disrupted global marketing on a route that accounted for 15 percent of global maritime traffic, causing companies to reroute long and costly voyages around South Africa.
The IEA additionally said that the disturbance meant around 1.9 billion barrels of oil were at sea at the end of last month. It is the highest number since the COVID-19 pandemic. The fuel needs extended due to the more extended pathways and Singapore’s fuel loading of ships reached all-time highs.
While shipping disruptions may provide a short-term boost, the agency warned that post-pandemic turmoil and a clouded economic outlook could weigh on demand. The global economic slowdown is serving as an additional headache for oil consumption, driving improvements in vehicle efficiency and expanding electric vehicle fleets, the agency added in its statement.
“Growth will continue to be heavily skewed towards non-OECD (Organisation for Economic Co-operation and Development) countries, even as China’s dominance gradually fades. The latter’s oil demand growth is expected to slow from 1.7 million bpd in 2023 to 620,000 bpd in 2024,” the IEA stated.
Despite energy efficiency gains and the use of electric vehicles, annual growth in demand remains sharply lower than in 2023 when it reached 2.3 million bpd. The whole need is predicted to reach 103.2 million bpd in 2024 compared to 101.8 million BPD last year.
Tamas Varga, an analyst at PVM Oil Associates, commented that, “Whilst the IEA’s view on global oil balance is still more than a country mile away from OPEC’s prognosis, this report does nothing to dent the developing upbeat mood.”
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