The International Energy Agency has lowered its oil demand growth forecast for 2025, citing weakness in Chinese crude imports.
The IEA now expects global oil consumption to grow by 950,000 barrels per day next year, down 30,000 bpd from its previous forecast, the Paris-based agency said in a report on Tuesday.
In June, Chinese oil demand contracted for a third straight month, driven by a slump in industrial inputs, including for the petrochemical sector, the IEA said.
Initial trade data point to further weakness in July, as crude oil imports sank to their lowest level since the stringent lockdowns of September 2022, the agency added.
China, the world’s second-largest economy, is facing challenges with a real estate crisis, sluggish consumer spending and a deceleration in manufacturing.
The country’s second-quarter gross domestic product rose by 4.7 per cent annually, lower than the 5.1 per cent growth expected in line with a Reuters poll.
The IEA expects Chinese oil demand to grow by 300,000 bpd this year, supported by some improvement in the second half of 2024.
For the next year, consumption is projected to grow by 330,000 bpd, but with the “risk 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 agency said.
However, the IEA kept its 2024 oil demand forecast unchanged at 970,000 bpd, as the reduction from China was mostly offset by better-than-expected gasoline consumption in the US.
“Demand in advanced economies, especially for US gasoline, has shown signs of strength in recent months,” the agency said.
“The US economy, where one-third of global gasoline is consumed, has outperformed peers, with a resilient service sector buttressing miles driven.”
The IEA also said that the oil market could be oversupplied in 2025 if Opec+ proceeds with its plan to start unwinding some production cuts this year.
Even if those cuts remain in place, global crude stocks could build by an average 860,000 bpd next year, the agency said.
Opec+ plans to gradually lift voluntary production curbs of 2.2 million bpd on a monthly basis from October 2024 to September 2025.
However, the alliance of oil-producing countries has said that the monthly increases in output could be “paused or reversed” depending on market conditions.
On Monday, Opec adjusted its 2024 oil demand forecast for the first time since it was announced in July last year.
Global crude consumption is projected to grow by 2.1 million bpd this year, a reduction of 135,000 bpd from Opec's initial forecast, the group said in its monthly oil market report.
For 2025, global oil demand growth has been revised slightly down by 65,000 bpd to 1.8 million bpd.
“The Opec demand estimates for this and next year remain at the upper end of market expectations even after the latest revision,” said Giovanni Staunovo, strategist at UBS.
The Swiss bank projects that oil demand will increase by 1.5 million bpd this year and by 1.3 million bpd next year.
“Generally, oil demand growth remains healthy, particularly very strong in the US and India, while rather disappointing in China,” Mr Staunovo told The National.
