The International Energy Agency (IEA) has cut its 2024 oil demand growth forecast by 70,000 barrels per day (bpd), or about 7.2%, to 900,000 bpd, it said in its monthly oil market report on Thursday, The Paris-based agency cited a slowdown in Chinese demand as the main driver of weaker global demand growth. It now expects Chinese demand to grow by only 180,000 bpd in 2024 as a broader macroeconomic slowdown coincides with higher uptake of electric vehicles. “With the steam seemingly running out of Chinese oil demand growth, and only modest increases or declines in most other countries, current trends reinforce our expectation that global demand will plateau by the end of this decade,” the IEA said.
Oil prices , pared early gains after release of the report.
There is a wide split in 2024 demand growth forecasts owing to differences over China and the pace of the world’s transition to cleaner fuels. The Organization of the Petroleum Exporting Countries (OPEC) also cut its 2024 forecast this week, though its view remains far higher than the IEA’s. OPEC projects oil demand growth at 2.03 million bpd in 2024 and 1.74 million bpd in 2025, but back-to-back cuts to its forecasts also underline the challenges the producer group is facing in balancing the market.
The IEA left its 2025 demand growth forecast unchanged at about 950,000 bpd but suggested that the global oil market could be oversupplied next year if the wider OPEC+ producer group proceeds with its plan to unwind voluntary output cuts. Rising global oil supply is being driven by higher non-OPEC output, the IEA said, with the agency forecasting non-OPEC supply growth at 1.5 million bpd for this year and next, with higher production from the United States, Guyana, Canada and Brazil. “With non-OPEC+ supply rising faster than overall demand – barring a prolonged stand-off in Libya – OPEC+ may be staring at a substantial surplus,” the IEA said.
Highlights
- Global oil demand growth continues to decelerate, with reported 1H24 gains of 800 kb/d y-o-y the lowest since 2020. The chief driver of this downturn is a rapidly slowing China, where consumption contracted y-o-y for a fourth straight month in July, by 280 kb/d. Average annual gains of 900 kb/d in 2024, compared to 2.1 mb/d last year, will take demand to almost 103 mb/d. An increase of 950 kb/d in 2025 will be equally subdued.
- World supply rose by 80 kb/d to 103.5 mb/d in August, with outages caused by a political dispute in Libya combined with maintenance in Norway and Kazakhstan offset by higher flows from Guyana, Brazil and elsewhere. Annual gains strengthen from 660 kb/d this year to 2.1 mb/d in 2025. Non-OPEC+ increases by 1.5 mb/d this year and next, while OPEC+ may fall by 810 kb/d in 2024 but rise by 540 kb/d next year if voluntary cuts stay in place.
- Global refinery throughputs are forecast to increase by 440 kb/d to 83 mb/d in 2024, and by 630 kb/d to 83.7 mb/d next year. Much weaker than expected Chinese runs in July and a further deterioration in margins continue to weigh on the forecast. Cracking margins briefly turned negative in Europe and Singapore. US Gulf Coast cracking margins are more resilient, but they have nevertheless fallen by two-thirds versus year-ago levels.
- Global observed oil stocks declined by 47.1 mb in July. The drawdown was concentrated in crude oil, NGLs and feedstocks (-75.5 mb), while oil products built to their highest level since January 2021. OECD industry stocks fell counter-seasonally by 12.3 mb in July to stand 78.5 mb below the five-year average. Preliminary data show continued stock declines in August.
- Oil prices spiralled lower in August and early September, with ICE Brent futures plunging by about $10/bbl as floundering Chinese demand and economic headwinds heightened oversupply fears. Investor selling added to the bearish sentiment, with net speculative exchange holdings slumping to multi-year lows. At the time of writing, Brent was trading at around $70/bbl – the lowest level since late-2021 and down $20/bbl from April’s 2024 high.