China oil demand growth ground to a halt in 2Q: IEA

The IEA said today that China's oil demand growth came to a standstill in the second quarter, driven down by weak industrial fuels and petrochemical feedstock demand.

"Oil consumption in China, long the engine of global oil demand growth, contracted in both April and May, and is now assessed marginally below year earlier levels in [the second quarter]," the Paris-based agency said in its latest Oil Market Report (OMR).

The agency now sees China's oil demand growing by 410,000 b/d in 2024, compared with its forecast for 480,000 b/d in last month's OMR.

But the IEA's global oil demand growth forecast for 2024 remained broadly unchanged, rising by 10,000 b/d to 970,000 b/d as the downgrade from China was offset by better-than-expected consumption in OECD economies.

It said global growth at 710,000 b/d in the April-June period was the slowest quarterly increase since the final three months of 2022 when China was in lockdown.

For next year, the agency cut its demand growth forecast by 50,000 b/d to 980,000 b/d — its lowest 2025 estimate so far.

Lower Chinese consumption data feed into the IEA's narrative that the country's pre-eminence as a source of global demand growth is fading.

"Last year the country accounted for 70pc of global demand gains — this will decline to around 40pc in 2024 and 2025, with other emerging economies such as India and Brazil capturing greater prominence," it said.

While the IEA said much of China's deceleration was due to consumption growth normalising following a post-Covid rebound in 2023, it also noted an "intrinsic slowdown" related to LPG/ethane and naphtha use in petrochemicals production.

On global oil supply, the IEA increased its growth estimate from around 700,000 b/d to 770,000 b/d on the back of strong production from the US in the second quarter. It also noted a 150,000 b/d rise to 102.9mn b/d in June after Brazil, Canada and Kazakhstan bounced back from oil field maintenance and as biofuels output rose seasonally to offset a significant output decline from Saudi Arabia.

The IEA forecasts non-Opec+ supply growth of 1.5mn b/d this year and a 740,000 b/d fall from Opec+ because of its production cuts. The agency has not yet incorporated the Opec+ plan to start unwinding some of its from October this year, noting the alliance said this decision could be paused or reversed.

For 2025, the IEA sees global oil supply growing by 1.8mn b/d to a record 104.8mn b/d.

The IEA also highlighted a rise in global oil inventories. These increased for a fourth consecutive month in May, by 23.9mn bl to the highest since August 2021. Preliminary data for June show a stock fall of 18.1mn bl, the IEA said.

By Aydin Calik

IEA global supply-demand balance mn b/d