Global oil demand is set to rise by less than 1 million barrels per day (bpd) in both 2024 and 2025, as a contraction in Chinese consumption has limited growth so far this year, the International Energy Agency (IEA) said on Tuesday, keeping its near-term growth forecasts unchanged.
World oil demand rose by 870,000 bpd in the second quarter of the year, amid China’s oil demand contracting for a third consecutive month in June, the agency said in its closely-watched Oil Market Report.
While China’s oil demand weakened, gasoline consumption in the United States has been very strong in recent weeks and months, the IEA said.
“The US economy, where one-third of global gasoline is consumed, has outperformed peers, with a resilient service sector buttressing miles driven,” the agency said in the monthly report.
Due to the stronger U.S. demand, oil consumption in advanced economies flipped from a yearly decline of 300,000 bpd in the first quarter of the year to growth of 190,000 bpd in the second quarter, according to the IEA’s estimates.
At present, the oil market is in deficit as supply is struggling to keep pace with peak summer demand. This has led to inventory draws globally in June and July, per the agency’s estimates.
Despite the current seasonal strength in U.S. demand, supply increases will exceed growth in consumption this year and next, the agency noted.
Even if the OPEC+ doesn’t start to ease the cuts, global inventories could build by an average 860,000 bpd next year as non-OPEC+ supply is set to grow by around 1.5 million bpd in 2024 and again in 2025. This would more than cover expected demand growth, according to the IEA.
On Monday, OPEC cut its forecasts of global oil demand growth this year and next, in the first downward revision since the organization issued its initial estimate for 2024 a year ago.
Despite OPEC’s cut to expected demand growth, the gap between the cartel’s assessment and that of the IEA remains at more than 1 million bpd.
By Tsvetana Paraskova for Oilprice.com