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The International Energy Agency (IEA) has scaled down its forecast for the growth in oil demand during 2024 as it expects the consumption of fuels to come down amid the economic slowdown in the advanced OECD countries.

The Paris-based agency has reduced its oil demand forecast for the year by 140,000 barrels per day (bpd) to 1.1 million bpd.

The IEA in its monthly oil report said its lower growth outlook for 2024 was on account of the slowdown in industrial activity and a mild winter leading to a reduction in fuel consumption. It also mentioned the fall in share of diesel cars which was leading to lower fuel sales.

"Combined with weak diesel deliveries in the United States at the start of the year, this was enough to tip OECD oil demand in the first quarter back into contraction," the IEA said.

However, the Organization of the Petroleum Exporting Countries (OPEC) expects the world oil demand to increase by 2.25 million barrels per day (bpd) in 2024. The projection would enable the oil cartel to go in for higher prices.

The IEA’s forecast for 2025 put the demand for oil at 1.2 million bpd which is marginally higher than its projection for 2024.

Since India imports over 85 per cent of its crude oil requirement, any increase in global oil prices leads to an increase in the country’s oil import bill and weakens the rupee due to the larger outgo of foreign exchange.

The government’s decision to go in for the cheaper purchase of oil from Russia, despite Western pressure, has helped India to reduce its oil import bill by 16 per cent to $132.4 billion for the fiscal year 2023-24 from $157.5 billion spent in the previous year.

The total quantity of oil imported in 2023-24 was 232.5 million metric tonnes (MMT) compared with 232.7 MMT in 2022-23 which is more or less the same level.