The International Energy Agency (IEA) has recently amended its forecast for global oil demand growth in 2024, attributing this adjustment primarily to the persistent economic weakness observed in China. According to the latest insights provided by Tudor Pickering Holt, the global oil demand is now anticipated to rise by 900,000 barrels per day this year.
This figure represents a downward revision from the earlier projection of 970,000 barrels per day. Planning for 2025, the IEA predicts demand will expand by 950,000 barrels per day, a figure described as 'effectively unchanged' by Tudor Pickering Holt. The IEA’s previous monthly report had projected an increase in oil demand of 'slightly less than' 1 million barrels per day for both 2024 and 2025.
During the first half of the current year, the data indicates a rise of 800,000 barrels per day in global oil demand compared to the same period last year. This is significantly lower than the 2.3 million barrel increase recorded in the previous year. Notably, oil consumption in China has experienced a downturn for four consecutive months, culminating in a cautious outlook from the IEA.
In its recent assessment, the IEA communicated that China's oil demand is now expected to increase by only 180,000 barrels per day in 2024. This subdued forecast is largely due to a broad-based economic slowdown coupled with a noticeable shift from oil to alternative fuels impacting overall consumption rates.
The rise of electric vehicle (EV) sales is one notable trend that is contributing to the decline in road fuel demand. Additionally, the ongoing development of an extensive national high-speed rail network in China poses restrictions on growth within the domestic air travel sector. In another significant development, on Tuesday, the Organization of the Petroleum Exporting Countries (OPEC) revised its projections for global oil demand for the years 2024 and 2025.
A week prior, various members of OPEC and its allies, recognized collectively as OPEC+, reached a consensus to prolong their voluntary oil output reductions by an extra two months. "Given that non-OPEC+ supply is escalating at a pace that outstrips overall demand, barring any extended disruption in Libya, OPEC+ could be facing a substantial supply surplus," stated the IEA.
The agency characterized the growth in oil demand outside China as being 'tepid at best', indicating that gasoline consumption in the United States has declined year-over-year in five out of the initial six months of 2024. The IEA cautioned that 'structural headwinds and sluggish economic growth' are contributing factors leading to continuous contractions in oil deliveries across several advanced economies.
For developed nations, oil consumption in 2024 might fall almost 2 million barrels per day below the levels recorded prior to the pandemic. Amid this backdrop, West Texas Intermediate (WTI) crude oil prices saw an uptick of 3% to $69.31 per barrel during Thursday's afternoon trading sessions, while Brent crude prices increased by 2.5% to $72.40 per barrel.
Despite undergoing substantial supply losses in Libya and ongoing crude oil inventory draws, Brent futures have dropped from a peak of over $82 per barrel observed in early August. The IEA concludes that with the momentum waning in Chinese oil demand growth and only negligible fluctuations in most other nations, the prevailing trends strongly support the anticipation that global oil demand will reach a plateau by the conclusion of this decade..