Oil prices to keep falling as demand weakens, says IEA head

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Oil prices are likely to keep falling, the head of the International Energy Agency has said, as producers continue to pump volumes that exceed global demand.

“Given the current weak demand and lots of oil coming from the non-Opec countries, mainly from America and others, we may well see downward pressure on the price,” said Fatih Birol.

The bearish comments come after a turbulent fortnight in oil markets, with the price of benchmark Brent crude falling by more than $10 a barrel to tumble below $70 on Tuesday for the first time in nearly three years.

The mood among traders and speculators has turned sharply in recent weeks on fears of weaker growth in China and the US, prompting Opec to delay a plan to start reversing more than 2mn barrels a day of cuts. Birol spoke as the IEA released its latest monthly report on the oil market, which noted that oil demand in the first six months of the year grew at the slowest pace since the Covid-19 pandemic.

The main reason for the slower growth of the oil market is China, he said. “In the last 10 years, around 60 per cent of global oil demand growth has come from China. Now the Chinese economy is slowing down,” Birol said.

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One year ago, Birol wrote in the Financial Times that the demand for fossil fuels would peak this decade. The IEA believes that oil demand is growing at a slower average rate this year of 900,000 b/d, compared with an increase of more than 2mn b/d in 2023. Total oil consumption will reach 103mn b/d this year, it said.

When it first cut its forecasts 15 months ago, the agency was widely criticised for being too bearish but, with only three months of the year left, Birol said it had proved accurate.

“We got some pushback from some corners with suggestions that our numbers were a result of some energy transition wishful thinking,” Birol said.

Opec had accused the IEA of peddling a “dangerous”, “anti-oil” narrative. The IEA is an arm of the OECD think-tank that was set up to ensure energy security.

Birol said lower oil prices could revive demand next year, but there would still be headwinds from slower growth in China and the further take-up of electric cars across the world. Brent was trading at about $71.50 on Thursday.

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