Disruptions to maritime trade in the Red Sea has lengthened oil delivery distances and times, leading to a drop in stocks, according to the International Energy Agency
Disruptions to maritime trade in the Red Sea has lengthened oil delivery distances and times, leading to a drop in stocks, according to the International Energy Agency AFP

The International Energy Agency warned Thursday of plummeting oil stocks even as global growth in demand loses momentum.

"Global observed oil stocks plummeted by about 60 mb (million barrels) in January, preliminary data indicate, with on-land inventories falling to their lowest level since at least 2016," the IEA said in its latest monthly oil market report.

In December, global inventories had increased by 21.6 mb, due to an increase in offshore oil storage (up 60.7 mb to 1,835 mb) which more than offset declines in onshore inventories that fell 39 mb, against a backdrop of disruptions to maritime traffic in the Red Sea, lengthening oil delivery distances and times.

"As the IEA celebrates its 50th anniversary this week, oil supply security remains as critical as ever," said the agency created half a century ago by the OECD to help rich countries weather the 1970s oil crisis which wreaked widespread economic havoc.

"Given heightened geopolitical risks and low global oil inventories, a modest surplus may help contain market volatility," said the IEA, highlighting the current febrile context with the uncertainty resulting from war in Ukraine and also the Middle East.

Noting that a sharp drop in China underpinned an 830,000 barrel decline in global oil demand to 102.1 million barrels per day (mbd) in the last quarter of 2023, the agency forecast that "the pace of expansion is set to decelerate further to 1.2 mbd in 2024, compared with 2.3 mbd last year".

The reasons it gave for that were economic woes but also progress towards greater energy efficiency and the growing global market share of electric vehicles.

China, India and Brazil are expected between them to account for three quarters of global oil demand growth across this year with the total demand reaching a new peak of 103 million bd.

"The expansive post-pandemic growth phase in global oil demand has largely run its course," the IAE suggested.

The IEA expects that oil demand could peak by the end of this decade.