S&P Global —21 August 2024
Daily Update: August 21, 2024
Low Oil Demand in China May Signal Structural Change
By Nathan Hunt
Start every business day with our analyses of the most pressing developments affecting markets today, alongside a curated selection of our latest and most important insights on the global economy
China is the global leader in electric vehicles. Over 41% of new vehicles sold in June in China were either pure electric or hybrid. In the first half of 2024, China produced 4.93 million EVs, and Chinese manufacturers have built more than half the EVs produced globally. China has also been replacing much of its gasoil-burning trucking fleet with heavy-duty trucks that burn LNG. From January through May, sales of LNG-fueled heavy-duty trucks rose 127% year over year to 92,562 units, accounting for 21.4% of the country's total heavy-duty truck sales. More EVs and more LNG-powered trucks may translate into structurally lower oil demand.
On Aug.13, the International Energy Agency (IEA) said it saw a major deceleration in oil demand growth led by China. Preliminary data from July suggests that Chinese oil imports fell to their lowest level since September 2022, when the country was experiencing lockdowns from the COVID-19 pandemic. Chinese oil demand has fallen steadily for the past three months.
Data from China’s independent refineries indicate low utilization rates of about 52% as of July 10. Gasoil output at these refineries fell 12% month over month to a 26-month low. According to S&P Global Commodity Insights, a sluggish housing market, slow construction of infrastructure projects, and growing use of LNG-fueled heavy-duty trucks and EVs could account for the low demand for gasoil in the Chinese market.
The IEA and OPEC have been engaged in a very public disagreement about the future direction of global oil demand, and Chinese oil demand in particular. In July 2023, OPEC forecast healthy oil demand growth mainly due to demand growth from a revitalized Chinese economy exiting pandemic restrictions. However, in recent months, OPEC has revised the expected demand for crude downward, striking a bearish tone. The IEA has also been revising oil demand numbers downward for 2024 and 2025, reflecting lower demand from China. The IEA believes that peak global oil demand will come before 2030, while OPEC believes that oil demand will not plateau until 2035. S&P Global Commodity Insights forecasts that global oil demand — including biofuels — will peak in 2034.
If the IEA’s projections are accurate, this may indicate that even with production cuts from OPEC+ countries, the world may soon see oil supply outstripping demand. More bullish sentiments on oil demand see a future in which demand from India grows very quickly, replacing and exceeding lower demand from China.
"Peak oil demand in China will come earlier than in India, where demand may continue to keep growing for much longer given the relative lower base, economic expansions and a young population," said Kang Wu, global head of demand research at S&P Global.
Today is Wednesday, August 21, 2024, and here is today’s essential intelligence.
Listen: Exploring The Role Of Carbon Markets In Reaching Climate Targets
On this podcast, we often hear how achieving the low-carbon transition on a global scale will require a mix of solutions. Carbon markets are one key tool available to companies and countries. In this episode of the ESG Insider podcast, S&P Global Sustainable1 brings you part one of a two-part miniseries on carbon markets. This episode digs into voluntary and compliance markets, including how they're structured and used, how they're evolving and the challenges and opportunities ahead.
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Third Quarter Economy Signals Sought From Flash PMI Data After Japan GDP Shows Rebound
Japan's economy enjoyed a strong second quarter, according to official data, which corroborate recent robust survey data. Gross domestic product rose 0.8% in the three months to June, according to initial estimates from the Cabinet Office. The expansion comes as welcome news after the official data had shown GDP contracting 0.6% in the first quarter.
—Read the article from S&P Global Market Intelligence
ETF Securities Lending Activity Shines A Light On Market Dynamics.
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—Read the article from S&P Global Market Intelligence
US Export Coal Prices Fall On Slowing Global Economy
US domestic coal prices were mixed in July, with western coal moving higher and eastern coal falling sharply. High steam coal inventories are likely to maintain pressure on coal markets through the summer months despite growth in natural gas prices. In the longer term, the US coal market is forecast to come under increasing pressure over the next 10 years from the expansion of zero-carbon electricity incentivized by the Inflation Reduction Act.
—Read the article from S&P Global Market Intelligence
Croatia Becomes A Premium LNG Hub Because Of East Med Heatwaves
Heatwaves across the East Mediterranean and domestic storage requirements have resulted in Croatia becoming a "premium hub" in Europe for LNG cargoes, trade sources said. Croatia's LNG imports have been relatively stable even the rest of Europe sees inflows at multiyear lows. Croatia's LNG imports of 206,000 metric tons in July were the highest for the month since 2021.
—Read the article from S&P Global Commodity Insights
More Cautious Than Optimistic: Lower-Rated US Tech Issuers Continue To Face Ratings Pressure
A surprisingly durable macroeconomic backdrop continues to support US technology issuers, though a broader improvement in the operating performance and profitability of issuers S&P Global Ratings rates 'B' and below has yet to materialize. Negative rating actions continued to outnumber positive rating actions 2 to 1 among this cohort in the first half of 2024 and S&P Global Ratings anticipates ratings pressure will persist in the second half of the year.
—Read the article from S&P Global Ratings
Daring a New Era of Uncertainty and Risks — Johannesburg (Sept. 3, 2024)
Africa's strong economic performance and remarkable resilience present significant growth opportunities. However, the continent's structural transformation has been slow and uneven, highlighting the need for bold reforms to meet Africa's development financing needs. This in-person event will explore the theme "Daring a New Era of Uncertainty and Risks" through key topics.
—Register for the in-person event from S&P Global Market Intelligence