The International Energy Agency trimmed its forecast for this year’s oil-demand growth for the third month in a row, as a rapid slowdown in Chinese consumption weighs on the global outlook.
The Paris-based organization forecasts global demand to grow by 862,000 barrels a day this year from 903,000 barrels a day previously, while growth estimates for next year were raised slightly to 998,000 barrels a day from 954,000 barrels a day.
This marks a sharp slowdown from the roughly 2 million barrels-a-day growth seen over the 2022-2023 post-pandemic period, with total demand now expected at an average of 102.8 million and 103.8 million barrels a day in 2024 and 2025, respectively.
“Chinese oil demand continues to undershoot expectations and is the principal drag on overall growth,” the IEA said, adding that the country is expected to account for around 20% of global gains both this year and next, compared to almost 70% in 2023.
The IEA’s projections remain substantially lower than those of the Organization of the Petroleum Exporting Countries. The group of oil-producing countries trimmed its forecast earlier this week for the third consecutive time, but still sees demand growth at healthy levels of 1.93 million barrels a day this year and 1.64 million barrels a day next year.
Global demand rose by 680,000 barrels a day in the third quarter, at its slowest pace since the fourth quarter of 2022 when China was in full lockdown, according to the IEA.
Meanwhile, Chinese demand contracted by 500,000 barrels a day on-year in August after having declined by an average of 190,000 barrels a day since April. Still, the agency said it expects the country to return to modest growth in the fourth quarter of this year and in 2025, when annual demand is projected to increase by 220,000 barrels a day.
“Recently announced government stimulus packages for the economy are expected to support the resumption of an upward trajectory,” the IEA said. “But the overall impact is likely to be limited and we anticipate any increase in oil demand will be overwhelmingly dependent on growth in petrochemical feedstock products.”
Tuesday’s report came as crude prices plunged 4% on easing concerns over Iranian supply disruptions and a weaker demand outlook after China failed to provide details on the scope of its stimulus plan and OPEC cut its oil-demand growth forecast for a third consecutive month.
Brent crude currently trades around $74 a barrel, while the U.S. oil gauge, West Texas Intermediate, is around $71 a barrel. The price slide was also driven by a Washington Post report saying Israel told the U.S. that it’s willing to strike military rather than oil or nuclear facilities in Iran, suggesting a more limited counterstrike and easing fears of a wider war.
Global oil supply fell by 640,000 barrels a day in September, the IEA said, due to production losses in Libya and maintenance works in Norway and Kazakhstan. Total supply is still seen at an average of 102.9 million barrels a day this year and 105 million barrels a day next year.
Output from non-OPEC+ countries was lower in September due to maintenance in Norway and Canada, as well as precautionary shut-ins of some oil and gas platforms in the Gulf of Mexico due to hurricanes.
Still, non-OPEC+ countries are set to lead global supply, with production expected to grow by 1.5 million barrels a day in both 2024 and 2025, driven by the U.S., Guyana, Canada and Brazil. OPEC+ output is instead now expected to decline by 820,000 barrels a day and to rise by 2 million barrels a day next year.
The cartel and its allies are set to start unwinding voluntary cuts of 2.2 million barrels a day starting from December in a bid to regain market share, despite weaker prices and widespread fears of a global surplus.
In August, crude output from OPEC+’s member countries fell by 540,000 barrels a day to 40.92 million barrels a day, mainly due to Libyan losses as production across much of the bloc was unchanged or just marginally lower.
Supply from the OPEC+’s 18 countries subject to production quotas still stood 720,000 barrels a day above an implied target of 33.7 million barrels a day, including extra curbs pledged by Iraq, Russia and Kazakhstan, according to IEA calculations.
Russia’s crude supply was broadly flat in September at 9.11 million barrels a day. Crude exports jumped by 500,000 barrels a day to 7.5 million barrels a day last month, but revenue fell by $800 million compared with the previous month due to lower prices.