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The International Energy Agency (IEA) has revised down its 2024 oil demand growth forecast due to the economic slowdown in China, as reported by Reuters. The IEA stated on Thursday that global oil demand is projected to increase by less than previously expected, reinforcing the view that consumption may level off by the end of this decade.
According to the IEA’s monthly report, global oil demand is expected to rise by 900,000 barrels per day, a reduction of 70,000 barrels per day, or 7.2%, compared with the agency’s earlier projection. This places the forecast at the lower end of industry expectations.
The outlook for 2024 demand growth is divided, mainly due to differing opinions on China’s economic trajectory and the pace of the transition to cleaner energy sources. While the Organization of the Petroleum Exporting Countries (OPEC) also reduced its 2024 forecast this week, its projections remain significantly higher than those of the IEA.
The IEA noted that growth in China’s oil demand appears to be losing momentum, and only modest changes are expected in other countries. This trend supports the IEA’s prediction that global demand will reach a plateau by the end of the decade.
Concerns about global demand have led to a decline in oil prices, with Brent crude dropping below $70 a barrel this week, reaching its lowest point since December 2021. Following the release of the IEA’s report, Brent crude briefly recovered to trade near $72.
China, long a key driver of global oil demand, is now seeing slower economic growth and a shift towards electric vehicles, altering the dynamics of the world’s second-largest economy. The IEA also highlighted that demand in other major economies is weakening, with gasoline consumption in the United States falling year-on-year in five of the first six months of 2024.
Outside China, oil demand growth remains sluggish, the IEA report emphasized.
Looking ahead, the IEA maintained its 2025 demand growth forecast at 950,000 barrels per day. However, the agency warned that the market could face oversupply if OPEC+ reverses its production cuts as planned. OPEC projects demand growth of 1.74 million barrels per day for 2025.
The IEA noted that rising global supply is mainly driven by non-OPEC nations, predicting that non-OPEC production will increase by 1.5 million barrels per day this year and next, with significant contributions from the United States, Guyana, Canada, and Brazil.
The IEA further stated that if non-OPEC+ supply continues to grow faster than demand, OPEC+ could encounter a significant surplus, barring any prolonged disruptions like the ongoing situation in Libya.
OPEC+, which includes partners like Russia, has implemented multiple production cuts since late 2022 to stabilize the market, with most of these cuts remaining in effect until the end of 2025. The group recently postponed the planned easing of its latest reduction of 2.2 million barrels per day from October to December, following a sharp drop in oil prices.