LONDON, Sept 12 (Askume) – The International Energy Agency (IEA) said on Thursday that global oil demand growth will be lower than normal this year due to weakness in China, reinforcing the agency’s view that consumption will stagnate this decade.
The industrialised nation’s consultancy said in a monthly report that global demand would rise by 900,000 barrels per day, down 70,000 barrels per day, or 7.2%, from its previous forecast and at the low end of the industry’s forecast range.
Demand growth forecasts for 2024 vary widely due to differences in the Chinese situation and the pace of the energy transition to cleaner fuels. The Organization of Petroleum Exporting Countries (OPEC) also cut its 2024 forecast this week , although its forecast was higher than the IEA’s.
The IEA said, “With oil demand growth slowing in China and modest or declining in most other countries, current trends reinforce our expectation that global oil demand will continue to decline through the end of this decade or remain stable.”
Oil prices fell on concerns over global demand, with Brent crude falling below $70 a barrel this week to its lowest level since December 2021. After the report was released, Brent crude oil prices briefly gave up gains and were trading near $72.
For years, China has driven the growth of global oil consumption. The International Energy Agency said China’s slow economic growth and the shift to electric vehicles have changed the paradigm for the world’s second-largest economy.
Demand in China is now expected to grow by 180,000 bpd in 2024, down from 410,000 bpd in July, as the spread of electric vehicles coincides with a broader economic slowdown and the development of a high-speed rail network.
In comparison, OPEC expects demand to grow by 2.03 million barrels per day in 2024, partly due to China’s strong expansion. The difference between OPEC and the IEA’s growth prospects for 2024 is equivalent to more than 1% of world demand.
Demand is also under pressure in other major economies, the International Energy Agency said. Gasoline use in top consumer the United States fell in five of the first six months of this year, compared with the same period last year, the report said.
“Oil demand outside China is growing at a very slow pace,” the report said.
The risk of oversupply
The IEA kept its demand growth forecast for 2025 unchanged at 950,000 barrels per day and said that if OPEC+ cuts production as planned, the market may be oversupplied. OPEC expects demand to grow by 1.74 million barrels per day in 2025.
The IEA said the increase in global supply was driven by non-OPEC countries. The agency estimates that non-OPEC production will increase by 1.5 million barrels per day this year and next, due to higher production in the United States, Guyana, Canada and Brazil.
“Barring a prolonged impasse in Libya, non-OPEC+ supply is growing faster than overall demand, allowing OPEC+ to run large surpluses,” the IEA said.
OPEC+, which includes allies such as Russia, will implement a series of production cuts from late 2022 to support the market, most of which will last until the end of 2025.
The organisation was originally scheduled to roll out the latest round of production cuts of 2.2 million barrels per day from October but decided to postpone the plan by two months after oil prices plunged last week.
