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China slowdown drags global oil demand: IEA

China slowdown drags global oil demand: IEA

London, 12 September (Argus) — A sharp slowdown in China continues to weigh on global oil demand growth, the IEA said today. In its latest Oil Market Report (OMR), the IEA sees China's demand increasing by just 180,000 b/d in 2024, compared with its forecast for 300,000 b/d last month and well below the 710,000 b/d it had projected in January. This was the main reason the IEA cut its 2024 global oil demand forecast by 70,000 b/d to 900,000 b/d. The Paris-based agency said year on year gains of just 800,000 b/d in the first half were the lowest since 2020 and based on "actual data received year-to-date." It sees demand growth remaining subdued in 2025 at 950,000 b/d, unchanged from last month's estimate. The gloomy outlook comes after China recorded a fourth consecutive oil monthly consumption decline in July, at 280,000 b/d, the IEA said. The Paris-based agency attributes the slowdown in China's oil use to a "broad-based economic slowdown and an accelerating substitution away from oil in favour of alternative fuels weigh on consumption." China is not the only country where oil demand is weaker than previously anticipated. The IEA halved its US oil demand growth estimate for this year to just 70,000 b/d, noting a sharp drop in gasoline deliveries in June. "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. The agency's latest medium term oil outlook sees world oil demand peaking at 105.6mn b/d in 2029. The IEA's latest projections add to concerns about the health of oil demand this year. Even Opec, which had until August kept its highly bullish oil demand forecast unchanged, has trimmed its expectations for this year and next although its 2024 projection of over 2mn b/d demand growth remains well above most other outlooks. Supply surplus incoming The IEA's forecast does not bode well for a plan by some members of Opec+ to start unwinding 2.2mn b/d of voluntary cuts starting in December. "With non-Opec+ supply rising faster than overall demand — barring a prolonged stand-off in Libya — Opec+ may be staring at a substantial surplus [next year], even if its extra curbs were to remain in place," the agency said. The IEA's latest balances show a supply surplus of more than 1mn b/d in 2025. On global supply, the IEA lowered its growth estimate to 660,000 b/d compared with 730,000 b/d last month. But global growth next year could be as high as 2.1mn b/d even if all Opec+ cuts are maintained, the IEA said. The agency said global observed oil stocks declined for a second consecutive month in July, by 47.1mn bl, although it noted a steep build in oil products stocks to the highest since January 2021. The IEA attributes the recent oil price declines to demand-based fears centred on China and noted the falls came despite "hefty supply losses in Libya and continued crude oil inventory draws." By Aydin Calik Global oil demand/supply balance mn b/d Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.