Informist, Thursday, Sep 12, 2024

MUMBAI – The International Energy Agency has scaled down its forecast for growth in global oil demand in 2024 as China's consumption of crude oil continues to slow down. The agency expects oil demand in 2024 to rise by 900,000 barrels per day, down from its previous estimate of 970,000 bpd, according to its Oil Market Report for September.

Growth in global oil demand continues to drop, as a rise of only 800,000 bpd in the first half of 2024 has been recorded on year, the lowest since 2020 and dramatically lower than the demand growth of 2.3 mln bpd recorded in 2023, the International Energy Agency said today. The decline in demand growth is mainly due to rapidly slowing demand in China, with its oil consumption contracting on year for the fourth straight month in July, by 280,000 bpd, the agency said.

In 2025, the Paris-based energy watchdog expects growth in global oil demand to average 950,000 bpd, largely steady from its previous estimate.

The recent slowdown in China stands in marked contrast to the 1 mln bpd average pace of growth over the preceding 12 months, or the post-COVID surge of 1.5 mln bpd in 2023. The country's oil demand is now set to expand by only 180,000 bpd in 2024, as a broad-based economic slowdown and accelerating substitution away from oil in favour of alternative fuels is weighing on consumption, the agency said.

The rapid decline in global oil demand growth in recent months has fuelled a sharp sell-off in oil markets, the energy watchdog said. Oil prices spiralled lower in August and early September, with Brent futures on the Intercontinental Exchange plunging by about $10 per bbl, as falling Chinese demand and economic headwinds heightened fears of oversupply, it said. "Surging EV (electric vehicle) sales are reducing road fuel demand while the development of a vast national high-speed rail network is restricting growth in domestic air travel," the report said.

Moreover, latest data for the US show a sharp decline in gasoline deliveries in June, following unexpected strength in May. As such, gasoline use in the world’s largest oil consumer declined on year in five of the first six months of this year. The current trends of economic growth in most countries reinforced expectations of global demand plateauing by the end of this decade, the agency said.

The agency said that global supply rose by 80,000 bpd to 103.5 mln bpd in August as higher flows from Guyana, Brazil and elsewhere offset outages caused by a political dispute in Libya and cuts due to maintenance in Norway and Kazakhstan, the energy agency said.

Annual supply growth is estimated to rise from 660,000 bpd this year to 2.1 mln bpd in 2025. Supplies from non-Organization of the Petroleum Exporting Countries and its allies are likely to increase by 1.5 mln bpd this year and the next, while supplies from OPEC and its allies may fall by 810,000 bpd in 2024 and rise by 540,000 bpd next year if voluntary cuts by the organisation remain in place, the energy watchdog said.

Brent crude oil futures have plunged from a high of more than $82 per bbl in early August to a near three-year low of just below $70 per bbl on Sep 11, despite hefty supply losses in Libya and continued crude oil inventory drawdowns, according to the report.

In an apparent effort to halt the slide in oil prices, in early September, Saudi Arabia and its OPEC+ allies announced they would postpone by two months the start of their planned unwinding of extra voluntary production cuts. The delay gives the alliance some time to further evaluate demand prospects for next year, as well as the impact of Libya outages and its plan to phase out additional curbs of 2.2 mln bpd by the end of next year.

However, with supply rising faster than overall demand from non-OPEC and its allies, the organisation may be staring at a substantial surplus, even if its extra curbs were to remain in place, the energy agency said.

At the time of writing this report, the price of West Texas Intermediate crude oil on the New York Mercantile Exchange was $68.21 per bbl, while that of Brent crude on the Intercontinental Exchange was $71.46 per bbl. End

US$1 = 83.97 rupees

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

Reported by Taniva Singha Roy

Edited by Avishek Dutta

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