IEA Reduces 2024 Oil Demand Growth Projections Amidst Economic Slowdown in China
The International Energy Agency (IEA) has adjusted its forecast for global oil demand in 2024, indicating a more moderated growth pace than previously anticipated. This revision reflects mounting concerns over China’s economic outlook and its impacts on global oil consumption. The IEA, serving as an adviser to industrialized nations, outlined these viewpoints in its recent monthly report, suggesting that international oil demand is on a trajectory towards stabilization within this decade.
According to the IEA, global oil demand is anticipated to increase by 900,000 barrels per day (bpd) this year. This forecast is a decrease of 70,000 bpd or 7.2% from earlier projections, positioning it at the conservative end of industry expectations. The downward revision primarily stems from uncertainties surrounding China’s demand recovery and divergent opinions on the swift transition towards greener energy sources.
The backdrop to these revised forecasts involves contrasting predictions about future oil demand, notably from the Organization of the Petroleum Exporting Countries (OPEC). While OPEC also moderated its forecast this week, its projection remains significantly higher than that of the IEA. The disparities underscore varying assumptions about China’s economic health and the global pace of moving towards environmentally-friendly fuel alternatives.
“As indicators weaken for Chinese oil demand growth and with most other countries showing only modest increases or decreases, the current trends affirm our anticipation that global demand will level off by this decade’s end,” remarked the IEA. This announcement comes amidst a period of declining oil prices, which have witnessed Brent crude tumbling to its lowest point since December 2021.
China has historically been a driving force behind worldwide increases in oil consumption. Nonetheless, the IEA suggests that shifts towards electric vehicles (EVs) and economic deceleration are altering demand dynamics in the world’s second-largest economy. Forecasts now point to a more subdued growth in Chinese demand, estimated at 180,000 bpd for 2024, significantly lower than the 410,000 bpd anticipated in July. This adjustment coincides with a wider economic slowdown, an uptick in electric vehicle adoption, and the expansion of high-speed rail networks impacting domestic air travel.
Conversely, OPEC maintains a more optimistic outlook, predicting a robust demand growth of 2.03 million bpd in 2024, largely fueled by a vigorous Chinese economy. This estimation marks a considerable divergence, over 1% of global demand, from the IEA’s forecast, showcasing the uncertainty in oil market projections.
The IEA also highlighted sluggish oil demand growth in other major economies, including a notable decline in gasoline consumption in the United States during the initial half of the year. “Outside of China, oil demand growth remains lackluster,” the agency noted.
While maintaining its 2025 demand growth forecast at 950,000 bpd, the IEA warns of potential market oversupply, especially if OPEC+ proceeds with planned output reductions unwinding. In contrast, OPEC anticipates a 1.74 million bpd increase in demand for 2025.
Further complicating the supply outlook is the increase from non-OPEC countries, led by production boosts in the United States, Guyana, Canada, and Brazil. The IEA posits that with non-OPEC+ supply outpacing overall demand growth, the consortium, including Russia and other allies, could face significant surpluses unless current output curtailments are maintained.
OPEC+ has adjusted its output strategies several times since late 2022 to bolster the market, with the most recent cuts scheduled until the end of 2025. Despite plans to alleviate these cuts by 2.2 million bpd from October, the group recently opted for a two-month delay in response to the downturn in oil prices, illustrating the volatile nature of the global oil market.
