Oil demand seeing 'major deceleration' led by China: IEA

The world is seeing a major deceleration in oil demand growth led by China, with inventories set to rise next year even if OPEC+ were to postpone its plans to ease output cuts, the International Energy Agency said Aug. 13.

The IEA, in its monthly oil market report, reiterated the impact of China's slowdown, with the US and particularly its service sector driving demand growth.

It highlighted preliminary data for July showing China's crude oil imports fell to their lowest since September 2022.

A current supply deficit, typical for the northern hemisphere summer, is set to evaporate in Q4 2024, according to the IEA's projections.

"In June, Chinese oil demand contracted for a third consecutive month, driven by a slump in industrial inputs... By contrast, demand in advanced economies, especially for US gasoline, has shown signs of strength in recent months. The US economy, where one third of global gasoline is consumed, has outperformed peers, with a resilient service sector buttressing miles driven," the IEA said.

On the implications for oil producers, it said, "Despite the marked slowdown in Chinese oil demand growth, OPEC+ has yet to call time on its plan to gradually unwind voluntary production cuts starting in the fourth quarter [of 2024]... Our current balances suggest that even if those cuts remain in place, global inventories could build by an average [of] 920,000 b/d next year as non-OPEC+ supply increases of around 1.5 million b/d in 2024 and again in 2025 more than cover expected demand growth."

The IEA trimmed its estimate of the "call" or demand for OPEC+ crude by 100,000 b/d for both 2024 and 2025, to 41.6 million b/d and 41 million b/d, respectively.

On oil inventories, the IEA said global "observed" inventories had fallen by 26.2 million barrels in June, following four consecutive months of increases. Oil inventories "on water" in tankers declined for a third consecutive month, by 24.2 million barrels, it said.

On the supply side, the report included a reduction in estimated non-OPEC oil supply growth in 2024 to 900,000 b/d from 1.1 million b/d in the previous version, likely reflecting the complexity of Kazakhstan's Chevron-led Tengiz field expansion underway this year as well as North Sea maintenance.

Americas growth

In terms of supply outside the OPEC+ group, the report increased the growth estimate for 2025 to 1.6 million b/d from 1.5 million b/d.

"The Americas quartet of the United States, Guyana, Canada and Brazil account for three-quarters, or roughly 1.1 million b/d, of non-OPEC+ supply gains in each of the two years 2024 and 2025," it said.

The IEA's downbeat views on oil demand growth followed a more bearish turn in OPEC's own monthly oil market report, published Aug. 12.

OPEC, in its report, said the "call" on the OPEC+ alliance's crude would be 43.0 million b/d in 2024 and 43.6 million b/d in 2025, down 100,000 b/d and 300,000 b/d, respectively, for the two years compared with its previous estimate. It now estimates global demand growth at 2.1 million b/d in 2024 and 1.8 million b/d in 2025.

Analysts at S&P Global Commodity Insights forecast global oil demand to grow by 1.6 million b/d in 2024 and 1.3 million b/d in 2025.