Slowdown in World Oil Demand Growth Signals Shift Toward Electric Vehicles
In a recent analysis, the International Energy Agency revealed that world oil demand growth decelerated in the second quarter, dropping to 710,000 barrels per day compared to the previous year. This slowdown was driven by the increasing popularity of electric vehicles and economic challenges.
The IEA report highlighted that the growth in demand during the second quarter was the slowest since the end of 2022. Despite this, the agency maintained its forecast of 970,000 bpd for oil demand growth in 2024, showing little change from its previous outlook.
Interestingly, the IEA’s projections contrast with those of OPEC, as the oil producers’ alliance expects robust demand growth in both 2024 and 2025. OPEC foresees a rise of 2.25 million bpd and 1.85 million bpd in oil demand for the respective years, fueled by key markets such as China, the Middle East, India, and Latin America.
One of the reasons cited by the IEA for its lower estimate is the contraction in Chinese consumption, as the country’s post-pandemic recovery reaches a plateau. The report also mentioned that global oil demand is expected to increase by just under one million bpd in the next two years due to factors like sluggish economic growth, increased efficiencies, and the shift towards vehicle electrification.
Additionally, the IEA noted that demand for industrial fuels and petrochemical feedstocks remained weak. On the supply side, global oil production saw a slight uptick of 150,000 bpd in June, reaching 102.9 million bpd.
Looking ahead, the analysis projected a growth in global refinery throughputs to 83.4 million bpd in 2024 and 84 million bpd in 2025. Despite the IEA’s prediction of a slowdown in oil demand growth, OPEC remains optimistic about the future of the oil market.
During the International Economic Forum in June, OPEC’s Secretary-General Haitham Al-Ghais emphasized the continued demand for oil, driven by a resurgence in the travel and tourism industry. He reassured stakeholders that OPEC is committed to maintaining supply, stability, and resilience in the oil market.
Al-Ghais highlighted the importance of focusing on economic fundamentals, supply, and demand, asserting that OPEC’s past forecasts for oil demand have been accurate. He criticized those who doubted OPEC’s projections, noting that they had to adjust their numbers throughout the year to align with reality.