Global oil demand in Q2 slowest in over a year due to fall in Chinese consumption: IEA

July 11, 2024 11:00 PM AEST | By Invezz

Global oil demand in Q2 slowest in over a year due to fall in Chinese consumption: IEA — Image source: Invezz

Why is Chinese oil demand slowing?

IEA said while most of China’s slowing growth in demand was due to the country’s post-pandemic rebound having run its course, it also said that recent drop points to an “intrinsic slowdown” and that the downswing in the industrial fuels indicates a “broader weakness in manufacturing”.

China has been shifting from an industrial and manufacturing-based economy to one that is more focused on services and consumption which is driving down demand for oil, especially in industrial uses.

At the same time, the country is also improving energy efficiency across various sectors. Crucially, adoption of electric vehicles (EVs) by mainland drivers is also reducing oil consumption, with Petro China, nation’s largest oil and gas producer predicting in April that oil consumption in China’s transport sector will peak next year “at the latest” due to EVs.

Non-OECD countries will account for this year’s global gains

IEA said global gains were forecasted to average just below 1 million barrel per day in 2024 and 2025 as “subpar economic growth, greater efficiencies and vehicle electrification act as headwinds”.

It said in contrast to weaker Chinese demand, second-quarter delivery data of gasoil and naphtha for OECD economies came in higher than expected, potentially signalling a budding recovery in Europe’s ailing manufacturing sector.

“While the bounce temporarily pushed quarterly OECD demand growth back into positive territory, non-OECD countries will account for all this year’s global gains. World oil demand growth expectations for the 2024 and 2025 are largely unchanged at 970 kb/d and 980 kb/d, respectively,” it said.

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