The International Energy Agency (IEA) maintained its 2024 global oil demand growth forecast but adjusted its 2025 estimate downward, attributing the revision to the weakened Chinese economy. The IEA’s monthly report highlighted that China’s post-COVID economic surge has waned, significantly impacting global oil consumption.

“Weak growth in China, following the post-Covid surge of 2023, now significantly drags on global gains,” the Paris-based energy watchdog stated. As the world’s largest oil importer and second-largest oil consumer, China’s sluggish economic performance is expected to have a considerable effect on global demand.

Despite the slowdown in China, the IEA anticipates robust oil demand in Western economies, particularly in the United States, where one-third of the world’s gasoline is consumed. The U.S. summer driving season is projected to be the strongest since the pandemic, further tightening the oil market due to supply cuts by OPEC and its allies (OPEC+).

“For now, supply is struggling to keep pace with peak summer demand, tipping the market into a deficit,” the IEA noted.

While the agency left its 2024 growth forecast unchanged at 970,000 barrels per day (bpd), it reduced the 2025 growth estimate by 30,000 bpd to 950,000 bpd. Outside the OECD countries, demand in the second quarter of 2023 was the slowest since the pandemic year of 2020, marking the IEA’s first reduction to the 2024 forecast since it was initially made over a year ago.

China’s contribution to global oil demand growth is expected to decline significantly, dropping to about a third in 2024 compared to over two-thirds in 2023. The IEA pointed out that the decline in China is particularly noticeable in gasoil and naphtha consumption, indicating a slowdown in construction and manufacturing and a pause in the expansion of the country’s petrochemical sector.

This outlook aligns with OPEC’s recent decision to cut its 2024 demand forecast for the first time since July 2023, also citing China’s economic slowdown. Despite the downward revision, OPEC still forecasts a global oil demand increase of 2.11 million bpd this year, significantly higher than the IEA’s estimate of 970,000 bpd.

(Adapted from TheGlobeAndMail.com)

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