Global oil demand growth continues to slacken, with a 1H24 increase of 800 kb/d year-on-year (YoY) the lowest since 2020, stated an oil market report (OMR) released by the International Energy Agency (IEA). One of the major reasons for this downturn is a rapidly decelerating China, where consumption contracted y-o-y for a fourth straight month in July, by 280 kb/d.
The OMR report said, the average annual gains of 900 kb/d in 2024, compared to 2.1 mb/d last year, will take demand to almost 103 mb/d. An increase of 950 kb/d in 2025 will be equally subdued. “The rapid decline in global oil demand growth in recent months, led by China, has fuelled a sharp sell-off in oil markets. Brent crude oil futures have plunged from a high of more than USD 82/bbl in early August to a near three-year low at just below USD 70/bbl on 11 September, despite hefty supply losses in Libya and continued crude oil inventory draws,” said the report.
According to the report, world supply rose by 80 kb/d to 103.5 mb/d in August, with outages caused by a political dispute in Libya combined with maintenance in Norway and Kazakhstan offset by higher flows from Guyana, Brazil and elsewhere. Annual gains strengthen from 660 kb/d this year to 2.1 mb/d in 2025. Non-OPEC+ increases by 1.5 mb/d this year and next, while OPEC+ may fall by 810 kb/d in 2024 but rise by 540 kb/d next year if voluntary cuts stay in place.
“Global refinery throughputs are forecast to increase by 440 kb/d to 83 mb/d in 2024, and by 630 kb/d to 83.7 mb/d next year. Much weaker-than-expected Chinese runs in July and a further deterioration in margins continue to weigh on the forecast. Cracking margins briefly turned negative in Europe and Singapore. US Gulf Coast cracking margins are more resilient, but they have nevertheless fallen by two-thirds versus year-ago levels,” said the IEA report.
The report further said, in an apparent effort to halt the precipitous slide in oil prices, in early September Saudi Arabia and its OPEC+ allies announced that they would postpone by two months the start of their planned unwinding of extra voluntary production cuts. The delay gives the alliance some time to further evaluate demand prospects for next year, as well as the impact of Libyan outages and its plan to phase out additional curbs of 2.2 mb/d by the end of next year.
It added, with non-OPEC+ supply rising faster than overall demand – barring a prolonged stand-off in Libya – OPEC+ may be staring at a substantial surplus, even if its extra curbs were to remain in place. In the context of a rapidly evolving market, reliable energy data and unbiased market analysis will become more important than ever.
