China’s oil demand outlook weakens further: IEA

The IEA issued updates to its numbers

The outlook for China's oil demand growth this year has weakened further, the IEA said today.

China's oil demand fell for a third consecutive month in June, with crude oil imports in July hitting their lowest since September 2022 when the country was locked down because of Covid, the Paris-based agency said in its latest Oil Market Report (OMR).

China's oil demand is now forecast to grow by 300,000 b/d in 2024, compared with 410,000 b/d in last month's report and well below the 710,000 b/d the IEA had projected in January. For next year, the agency pegs growth at 330,000 b/d, "but with risks skewed to the downside."

"Chinese oil demand growth has gone into reverse due to a slowdown in construction and manufacturing, rapidly accelerating deployment of vehicles powered by alternative fuels and comparison to a stronger post-reopening baseline," the IEA said.

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.

The IEA's global oil demand growth forecast for 2024 remained unchanged at 970,000 b/d as the downgrade from China was mostly offset by better than expected gasoline consumption in the US. The agency now sees US oil demand growth at 140,000 b/d this year, compared with 70,000 b/d last month.

The IEA's demand growth forecast for this year remains well below that of Opec which downgraded its forecast by 140,000 b/d to 2.11mn b/d. Opec sees Chinese oil demand growing by 700,000 b/d this year.

For next year, the IEA nudged down its oil demand growth projection by 30,000 b/d to 950,000 b/d, mostly on lower forecast Chinese demand.

On global oil supply, the IEA lowered its growth estimate for 2024 by 40,000 b/d to 730,000 b/d. Much bigger growth is forecast next year at 1.95mn b/d, led by gains from the US, Guyana, Canada and Brazil.

In terms of supply and demand balances this year, the agency's numbers point to a slightly tighter market than previously thought. It now sees a deficit of 130,000 b/d in 2024, compared with 80,000 b/d in last month's report. The deficit in the second half is seen at 390,000 b/d.

The IEA said that after four months of stock builds, global observed oil inventories fell by 26.2mn bl in June and preliminary data showed further draws in July.

But the IEA points to an oversupplied market next year, particularly given a plan by some Opec+ members to unwind some of their production cuts from October. But even if those cuts remain in place, the agency says global inventories could build by 860,000 b/d in 2025.

By Aydin Calik

IEA oil demand and supply balance