The International Energy Agency (IEA) has reduced its forecast for global oil demand growth in 2024 by 100,000 barrels per day (bpd).

The agency cited a sluggish start to the year in developed economies as a key factor contributing to the downward revision.

According to the latest Oil Market Report released by the IEA, global oil consumption has continued to experience a slowdown in growth momentum with first-quarter growth estimated at 1.6 million bpd.

This figure falls short of the IEA’s previous forecast by 120,000 bpd, indicating a more sluggish demand recovery than anticipated.

With much of the post-Covid rebound already realized, the IEA now projects global oil demand to grow by 1.2 million bpd in 2024.

Furthermore, growth is expected to decelerate further to 1.1 million bpd in the following year, reflecting ongoing challenges in the market.

This revision comes just a month after the IEA had raised its outlook for 2024 oil demand growth by 110,000 bpd from its February report.

At that time, the agency had expected demand growth to reach 1.3 million bpd for 2024, indicating a more optimistic outlook compared to the current revision.

The IEA’s latest demand growth estimates diverge significantly from those of the Organization of the Petroleum Exporting Countries (OPEC). While the IEA projects modest growth, OPEC maintains its forecast of robust global oil demand growth of 2.2 million bpd for 2024, consistent with its previous assessment.

However, uncertainties loom over the global oil market, particularly due to geopolitical tensions and supply disruptions.

The IEA has highlighted the impact of drone attacks from Ukraine on Russian refineries, which could potentially disrupt fuel markets globally.

Up to 600,000 bpd of Russia’s refinery capacity could be offline in the second quarter due to these attacks, according to the IEA’s assessment.

Furthermore, unplanned outages in Europe and tepid Chinese activity have contributed to a lowered forecast of global refinery throughputs for 2024.

The IEA now anticipates refinery throughputs to rise by 1 million bpd to 83.3 million bpd, reflecting the challenges facing the refining sector.

The situation has raised concerns among policymakers, with the United States expressing worries over the impact of Ukrainian drone strikes on Russian oil refineries.

There are fears that these attacks could lead to retaliatory measures from Russia and result in higher international oil prices.

As the global oil market navigates through these challenges, stakeholders will closely monitor developments and adjust their strategies accordingly to adapt to the evolving landscape.

The Federal Government of Nigeria has announced that domestic crude oil refiners and other operators in the sector are now permitted to buy crude oil in either naira or dollars.

This move comes as a response to longstanding demands from stakeholders in the industry and is poised to reshape the dynamics of the nation’s oil market.

The announcement was made on Monday through the Nigerian Upstream Petroleum Regulatory Commission during a briefing in Abuja.

According to the commission, the decision to allow the purchase of crude oil in naira or dollars aligns with the provisions of Section 109(2) of the Petroleum Industry Act 2021.

The development of the new template involved collaboration with key stakeholders, including representatives from NNPC Upstream Investment Management Services, Crude Oil/Condensate Producers, Crude Oil Refinery-Owners Association of Nigeria, and Dangote Petroleum Refinery.

Chief Executive of the Nigerian Upstream Petroleum Regulatory Commission, Gbenga Komolafe, said the new template will ensure a seamless implementation of the Domestic Crude Oil Supply Obligation (DCSO) and maintain a consistent supply of crude oil to domestic refineries.

He highlighted that the flexibility to transact in either naira or dollars would alleviate pressure on the country’s foreign exchange rate, potentially benefiting the overall economy.

Responding to inquiries regarding the currency of transaction, Komolafe reiterated that payments could be made in either United States dollars or naira, or a combination of both, as agreed upon in the Sales and Purchase Agreement (SPA) between the producer and the refiner.

This flexibility is expected to ease the financial burden on indigenous refineries and support their sustainability in the face of economic challenges.

The decision comes after modular refineries in Nigeria faced threats of shutdown due to difficulties in accessing foreign exchange for crude oil purchases.

These refineries with a combined capacity of producing 200,000 barrels of crude oil daily, struggled to secure dollars for purchasing crude, which is priced in US dollars.

The Crude Oil Refinery Owners Association of Nigeria had previously expressed concerns over the impact of the foreign exchange crisis on their operations.

Furthermore, alongside the announcement regarding crude oil purchases, the government revealed an increase in the country’s crude oil and condensate reserves to 37.5 billion barrels as of January 1, 2024.

Gas reserves also saw an uptick, reaching 209.26 trillion cubic feet during the same period, signifying substantial potential for future exploration and production activities.

As Nigeria navigates its oil and gas landscape, the decision to allow indigenous refineries to purchase crude oil in naira or dollars marks a significant step towards supporting local industry players and promoting economic stability in the sector.

With the potential to enhance operational efficiency and mitigate financial challenges, this policy shift holds promise for the growth and sustainability of Nigeria’s oil refining sector.

Oil prices fell on Monday as market participants reevaluated their risk premiums in the wake of Iran’s weekend attack on Israel, which the Israeli government said caused limited damage.

Brent crude oil, against which Nigerian oil is priced,  dipped by 50 cents, or 0.5%, to $89.95 a barrel while West Texas Intermediate (WTI) oil fell by 52 cents, or 0.6%, to $85.14 a barrel.

The attack, involving over 300 missiles and drones, marked the first assault on Israel from another country in more than three decades. It heightened concerns over a potential broader regional conflict impacting oil traffic through the Middle East.

However, Israel’s Iron Dome defense system intercepted many of the missiles, and the attack resulted in only modest damage and no reported loss of life.

Warren Patterson, head of commodities strategy at ING, noted that the market had largely priced in the potential attack in the days leading up to it. The limited damage and the absence of casualties suggest that Israel’s response may be more measured, which could help stabilize the oil market.

Iran, a major oil producer within OPEC, currently produces over 3 million barrels per day (bpd) of crude oil. The potential risks include stricter enforcement of oil sanctions and the possibility of Israeli targeting of Iran’s energy infrastructure, according to ING.

Nevertheless, OPEC possesses over 5 million bpd of spare production capacity, which could help mitigate any supply disruptions.

Analysts from ANZ Research and Citi Research have suggested that further significant impact on oil prices would require a material disruption to supply, such as constraints on shipping in the Strait of Hormuz. So far, the Israel-Hamas conflict has not had a notable effect on oil supply.

The market remains watchful of Israel’s response to the attack, which could influence the future trajectory of oil prices and broader geopolitical tensions in the region.