 "Low oil demand from China, supply-side shocks due to the conflict in West Asia, and increase in oil production by countries like US and Brazil are all important factors in determining crude oil price. Image used for representative purpose/Unsplash")
Global oil markets are expected to face a surplus of more than 1 million barrels a day next year as demand in China continues to lag, according to the International Energy Agency (IEA).
In its monthly report released Thursday (November 14), the IEA noted that oil consumption in China– historically a primary driver of global oil demand— has contracted for six consecutive months through September.
Growth in China’s oil demand this year is projected at just 10 per cent of the pace seen in 2023, the agency said.
China’s slowing oil demand
IEA’s Head of Oil Industry and Markets, Toril Bosoni, suggested that China’s oil demand may have already peaked, citing shifts in economic activity and transportation. “It’s not just the economy and the slowdown in construction,” Bosoni told Bloomberg TV.
“The adoption of electric vehicles, high-speed rail, and gas-fueled trucking is eroding Chinese oil demand growth.”
Brent crude futures were trading near $72 a barrel on Thursday.
The IEA forecasts that global oil demand will grow by 920,000 barrels per day this year, down from the rapid post-pandemic recovery rate seen in 2023.
For 2024, growth is expected to tick up slightly, with demand rising by 990,000 barrels per day to average 102.8 million barrels per day.
According to the IEA, the sub-1 million barrel daily growth for both 2023 and 2024 not only shows lackluster global economic conditions, but also a shift toward clean energy in transportation and power sectors.
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View AllEarlier this year, the agency predicted that world oil demand would plateau this decade as electric vehicles and renewable energy continue to displace fossil fuel, Bloomberg reported.
Crude oil price expected to be stable
While demand growth slows, oil output from non-Opec countries, including the United States, Brazil, Canada, and Guyana, is projected to increase by 1.5 million barrels per day over the next two years.
This expansion is expected to keep global supplies ahead of demand by more than 1 million barrels per day in 2024, even if the Opec+ coalition resumes production increases.
The surplus could provide a buffer for prices against potential shocks from conflicts in West Asia and other regions.
Crude prices have declined by 11 per cent since early October despite ongoing hostilities in West Asia, as markets weigh increasing production from the Americas, the IEA reported.