Nigeria Facing Large Oil Demand Destruction—IEA

By Adedapo Adesanya

Recently, the International Energy Agency (IEA) cuts its oil demand growth forecast for 2024, saying it saw evidence of demand destruction in some countries, including Nigeria, after the rise in global prices that ran throughout September.

In its Oil Market Report (OMR), the Paris-based agency put 2024 demand growth at 880,000 barrels per day compared with 990,000 barrels per day in its previous OMR.

For this year, the IEA raised its demand growth forecast slightly to 2.3 million barrels per day from 2.2 million barrels per day, citing “buoyant” results from major demand centres China, India, and Brazil.

It said there “has been some evidence of large-scale demand destruction, especially in lower-income countries like Nigeria, Pakistan and Egypt, and signs of accelerating declines within some OECD markets including the US.”

Nigeria has over the years faced crude theft and pipeline vandalism which has had a  negative impact on the country’s economy. It has also affected the contribution of the commodity to the country’s gross domestic product (GDP), which is currently at 5.23 per cent.

Consumption-wise, appetite for petrol and other energy sources have dropped with policy reforms including the removal of fuel subsidies and exchange rate unification from the President Bola Tinubu administration eroding the disposable income of Nigerians.

According to the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA), the consumption of Premium Motor Spirit (PMS), otherwise known as petrol, in the country as of August dropped to 52 million litres daily.

Meanwhile, the IEA left its supply forecasts unchanged for growth of 1.5 million barrels per day and 1.7 million barrels per day respectively this year and in 2024.

The voluntary cuts to supplies made by members of the Organisation of the Petroleum Exporting Countries and its allies, OPEC+, Saudi Arabia and Russia, will keep the oil market in deficit, the IEA said.

It noted a 63.9 million barrels drawdown in global observed inventories in August, with crude stocks dropping by 102.3 million barrels to the lowest level since at least 2017.

The IEA also said that the Israel-Hamas conflict has had “no direct impact on oil flows”, adding that geopolitical risk in a region crucial for oil supplies, meaning “markets will remain on tenterhooks as the crisis unfolds”.