Global oil demand growth significantly decelerated in the second quarter of 2024, marking the slowest increase since late 2022, primarily due to a contraction in Chinese consumption. This slowdown signals persistent economic headwinds impacting the global energy landscape and influencing future supply strategies.
This report is crucial for energy markets as it highlights a critical juncture where slowing demand, particularly from key Asian economies, meets evolving supply dynamics from both OPEC+ and non-OPEC+ producers. The interplay of these factors will dictate price stability and investment decisions in the coming quarters, challenging previous assumptions of robust demand recovery.
Executive Summary
The International Energy Agency's latest Oil Market Report indicates a notable deceleration in global oil demand growth during Q2 2024, easing to 710 thousand barrels per day (kb/d) year-on-year. This deceleration was largely driven by a contraction in Chinese consumption, signaling the end of its post-pandemic rebound. While global demand gains are projected to average just below 1 million barrels per day (mb/d) in both 2024 and 2025, persistent subpar economic growth, increased efficiencies, and vehicle electrification are acting as significant headwinds.
What Happened
In the second quarter of 2024, global oil demand growth slowed to 710 kb/d year-on-year, the lowest quarterly increase since Q4 2022. Concurrently, global oil supply rose by 150 kb/d to 102.9 mb/d in June, with Q2 2024 output increasing by 910 kb/d quarter-on-quarter, primarily led by the United States. OPEC+ has outlined a roadmap to gradually unwind 2.2 mb/d of voluntary production cuts from Q4 2024 through Q3 2025, contingent on market conditions.
Key Developments
- Demand Deceleration: Global oil demand growth slowed to 710 kb/d in Q2 2024, with Chinese consumption contracting, indicating a weaker-than-expected recovery.
- Supply Dynamics: Non-OPEC+ supply, led by the US, Canada, Guyana, and Brazil, is forecast to drive global supply growth, offsetting a projected decline from OPEC+ if current cuts persist.
- Refining Margins: Weak demand and poor margins pressured European and Chinese crude processing in May, though Asian margins saw a modest rebound in June.
Regional Context
The contraction in Chinese oil consumption underscores broader economic challenges in Asia, while robust non-OPEC+ supply growth, particularly from the Americas, is reshaping global trade flows and market balances. Geopolitical tensions in the Middle East continue to underpin price volatility despite demand concerns.
Market Impact
Traders and refiners face increased uncertainty as demand growth slows, potentially leading to softer crude prices and continued pressure on refining margins, particularly in the Atlantic Basin. Analysts will closely monitor OPEC+'s adherence to its unwinding roadmap and the pace of non-OPEC+ supply expansion for market direction.
Outlook
The market will keenly watch for further signals on global economic health and OPEC+ policy adjustments, as these factors will be critical in determining the trajectory of oil prices and supply-demand balances through 2025.
