S&P Global — 16 October 2024
Daily Update: October 16, 2024
China Approaches Peak Oil Demand in Ominous Sign for Industry
By Nathan Hunt
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China was the engine of oil demand growth before the COVID-19 pandemic. When restrictions related to the pandemic ended in China in 2023, many energy market participants expected growth for oil demand to bounce back. Instead, Chinese oil demand has declined this year. This lower-than-expected demand has been attributed to multiple factors, including slow economic growth, a weak construction sector and extreme weather events. Despite the fall in oil demand, the Chinese transportation sector has continued growing. One explanation for this discrepancy is that Chinese cars and trucks are using less oil because of the immense popularity of electric vehicles in China, the use of LNG in heavy-duty trucking and other vehicles demonstrating greater fuel efficiency. The implication of these changes is that oil demand will peak in a market even if transportation demand continues growing. That’s unwelcome news to the oil industry.
Representing 16% of global demand, China is the world’s second-largest consumer of oil after the US. In 2023, China consumed 15.5 million b/d of oil, excluding direct crude burn and natural gas liquids. Analysts at S&P Global Commodity Insights believe that this consumption could peak at 16.4 million b/d as early as 2027.
“China is the only major developing country that is likely to see demand of gasoline and gasoil/diesel … reach a plateau at present or in the near future," said Kang Wu, global head of oil demand research at S&P Global Commodity Insights. "While oil demand in nearly all developed countries has peaked, the vast majority of developing countries other than China will see their oil demand continue to grow in the foreseeable future."
In the second quarter of 2024, China’s oil demand growth was lower than expected. In the year to July, sales of battery-electric vehicles jumped 31.1% year over year and sales of internal combustion engine (ICE) vehicles fell 6.5%. Meanwhile, improved fuel efficiency from ICE vehicles is forecast to displace gasoline production by 2%-3%. Chinese crude imports fell 3.1% year over year between January and September. In addition, the average utilization of independent refineries in China's Shandong province has fallen to 52%, its lowest point since March 2020.
The International Energy Agency (IEA) has forecast the deceleration of oil demand for several months, pointing to consistently lower demand from China. The IEA also revised its estimates for global refining runs to significantly lower levels over the course of the year. OPEC disputed the IEA’s projections but also reduced its oil demand forecast for 2024 and 2025 for the third successive month. The OPEC demand projection revisions are significant since they reflect an acknowledgement that demand has not bounced back to expected levels this year.
Middle Eastern oil producers are the top supplier of crude to the Chinese market, with an over 50% market share. Saudi Aramco has developed closer commercial ties to the Chinese market by investing in Chinese refineries. While a decline in oil demand growth is significant, the Chinese market for oil remains large enough to attract Saudi Aramco’s investments.
Today is Wednesday, October 16, 2024, and here is today’s essential intelligence.
Listen: Breaking Down Barriers To Find Climate Solutions
Throughout Climate Week NYC, we heard about the importance of collaborating across silos to find solutions to climate change, the energy transition and nature loss. In this episode of the ESG Insider podcast, you’ll hear concrete examples of what that looks like in practice. Our hosts speak with two climate scientists about how their organizations are working to communicate across disciplines and build partnerships that can inform areas like policy and urban planning.
—Listen and subscribe to the podcast from S&P Global Sustainable1
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—Read the article from S&P Global Ratings
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—Read the article from S&P Global Market Intelligence
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—Read the article from S&P Global Commodity Insights
OPEC Cuts Oil Demand Growth Forecast For Third Month In A Row
OPEC on Oct. 14 trimmed its world oil demand forecast for 2024 and 2025 for the third successive month, thought it maintained that its estimates still reflected healthy, above-average growth. In its latest Monthly Oil Market Report, the producer group said global oil demand would grow by 100,000 b/d less than it had forecast in September, at 1.93 million b/d for 2024 and 1.64 million b/d for 2025.
—Read the article from S&P Global Commodity Insights
Idling Auto Sales Limit Upside For US Auto Sector Ratings
As US consumers' excess savings are depleted and unemployment rates rise gradually, S&P Global Ratings expects limited growth in auto sales through 2026. This is consistent with its expectations at the start of the year. S&P Global Ratings does not expect auto sales will recover to pre-pandemic levels in its forecasts through 2027.
—Read the article from S&P Global Ratings
Washington, DC: Datacenter And Energy Innovation Summit 2024 (Oct. 30, 2024)
Join Datacenter and energy analysts from 451 Research, S&P Global, and expert guests to discuss the latest trends and developments in the Datacenter industry, with a specific focus on the impact of AI on energy consumption. Don't miss this opportunity to gain valuable knowledge and network with industry professionals.
—Register for the in-person event from S&P Global Market Intelligence