IEA cuts oil demand forecast as Chinese economy stalls

Franz Perc/Alamy via Reuters

• 70,000 bpd trimmed from demand
• EVs and rail eat into air travel growth
• Report at odds with Opec predictions

Rapidly slowing Chinese economic output is the primary driver of falling global oil demand, the International Energy Agency has said, as it cut the forecast in its monthly oil market report.

The Paris-based energy watchdog has trimmed its 2024 oil demand growth outlook by 70,000 barrels per day, or around 7 percent, to an average of 900,000 bpd.

This growth “will take demand to almost 103 million bpd, dramatically lower than the growth of 2.3 million bpd recorded in 2023”, the agency said on Thursday.

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The IEA anticipates that Chinese oil demand will expand by only 180,000 bpd this year. 

The world’s top crude importer bought 11.56 million bpd in August, according to customs data.

Although China’s crude oil imports rose in August to the highest in a year, following four straight months of year-on-year decline, the increase is explained by lower oil prices rather than a recovery in oil consumption.

“Surging electric vehicle sales are reducing road fuel demand while the development of a vast national high-speed rail network is restricting growth in domestic air travel,” the IEA said. 

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Outside of China, the agency described oil demand growth as “tepid at best”.

“With the steam seemingly running out of Chinese oil demand growth, and only modest increases or declines in most other countries, current trends reinforce our expectation that global demand will plateau by the end of this decade,” the IEA said.

The IEA’s report vastly differs from Opec’s predictions. The oil producers group forecast 2024 oil demand growth at about 2 million bpd and at 1.7 million bpd in 2025.

The IEA expects 2025 global oil demand to grow by 950,000 bpd.

Opec+ members agreed last Thursday to delay unwinding their voluntary output cuts until December 1 but failed to stop oil prices from falling.

Brent traded at $71.78 a barrel at 15:18 GST, 21 percent down in a year, while WTI traded at $68.53.

“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,” the IEA said.