The International Energy Agency (IEA) recently released its monthly report, painting a bleak picture for oil demand according to Commerzbank’s Commodity Analyst Carsten Fritsch. In the first half of the year, oil demand increased by only 800,000 barrels per day compared to the previous year, which is only one-third of the increase seen in the previous year. The IEA expects demand to grow by 900,000 barrels per day for the entire year, with July showing a decrease in demand for oil in China for the fourth consecutive month.
China, which has been a major growth engine for global oil demand, is now expected to see a much smaller increase in demand of 180,000 barrels per day in 2024, according to the IEA. This shift means that China, once a key driver of growth, is now becoming a drag on the overall oil demand. The IEA projects a slight acceleration in global oil demand for next year, with an expected increase of 950 thousand barrels per day, while Chinese demand is set to rise by 260 thousand barrels per day. However, this growth in demand is expected to lag behind the projected increase in non-OPEC oil supply.
As a result of these projections, the call on OPEC oil is estimated to fall to an average of 26.2 million barrels per day next year, a decrease of over 1 million barrels per day from OPEC’s current production levels. This means that OPEC may need to reduce its supply next year in order to prevent a surplus in the market. The planned gradual increase in production would lead to a significant oversupply if adjustments are not made.
Overall, the outlook for oil demand in the coming years appears to be uncertain, with China’s slowing demand growth and the potential for OPEC to reduce its supply to avoid an oversupply situation. These factors could impact global oil prices and supply levels, leading to potential shifts in the market dynamics. Monitoring these developments and adjusting strategies accordingly will be crucial for oil producers and traders in navigating the evolving landscape of the industry.
