World oil demand decelerates, easing 710 kb/d year-on-year – slowest quarterly increase since 4Q22

The question among industry analysts particularly since the war against fossil fuels by certain die-hard net-zero emissions exponents and believers began is whether the world is really seeing the last days of fossil fuels as a global energy source, or their opinion discountenanced as one of those exaggerations of the global few.

Analysts have opined that If the climate alarmists really have the day, does it not therefore mean that the window of opportunity is fast closing or has even closed on significant oil sands plant expansions, new pipelines to tidewater and any future boom in conventional oil production, and according to them, who would like to invest in infrastructure projects that will take a decade or more to be approved, or cancelled much later, and or taxed into insolvency well before the end of their productive life spans?

For the greater number of analysts, the goals of the green transition will, inevitably take many more decades to achieve than net-zero emission exponents may be tempted to imagine.

Green transition initiatives have been postponed and cancelled in several EU countries and the UK. The principal cause of the retreat is popular resistance to green transition initiatives that contribute to what is already an unacceptably high cost of living.

Opinions hold it that should Donald Trump win in the U.S. November presidential election, it’s likely that progress towards net zero engagements will come to its end, especially in the US – in the next four years at least. It is equally similar concern in Canada according to a Canadian-based energy analyst, where the hitherto federal polling numbers were said to be holding up for Trudeau final calls for an election which would determine the cancellation or otherwise of a number of Liberal environmental initiatives – the “No More Pipelines Bill and the carbon tax” presumably, with several other setbacks which have been highlighted as primary indicators to the obvious roadblocks toward green transition. For analysts, oil production is just as likely to prove far more robust than the environmental movements have imagined.

However, world oil demand has continued to decelerate, with 2Q24 growth easing to 710 kb/d year-on-year – the slowest quarterly increase since 4Q22 according to a popular news agency which also reported that the Chinese consumption witnessed a contraction, as the country’s post-pandemic rebound continues to run its course. Global gains are forecast to average just below 1 mb/d in 2024 and 2025, as subpar economic growth, greater efficiencies and vehicle electrification act as headwinds.

Global supply rose 150 kb/d to 102.9 mb/d in June as field maintenance eased and biofuels rose, offsetting a significant drop in Saudi flows. Solid monthly gains pushed 2Q24 output 910 kb/d higher q-o-q. Growth of 770 kb/d is seen for 3Q24 with non-OPEC+ providing 600 kb/d of the gains. Annual increases of 770 kb/d are forecast in 2024 with gains of 1.8 mb/d next year.

Global refinery throughputs are forecast to rise by 950 kb/d to 83.4 mb/d in 2024, and by 630 kb/d to 84 mb/d next year. Weak demand and poor margins pressured Chinese and European crude processing in May. Margins declined in June in the Atlantic Basin and are close to multi-year lows. In Asia, they rebounded modestly in June, as run cuts eased regional crude market tensions.

Crude oil prices recovered from six-month lows in June, with Brent futures rising by $5/bbl to $86/bbl. Falling crude stocks, investor short covering and renewed Middle East geopolitical tensions contributed to the price strength, with fund positions recovering from historically low levels.

Observed oil inventories on the global scale rose for a fourth consecutive month in May, by 23.9 mb, while offshore inventories drew by 17.3 mb while on land stocks built by 41.3 mb to a 30-month high. OECD industry stocks rose by 27.8 mb to 2 845 mb but remained 69 mb below their five-year average. Preliminary data show global oil stocks falling by 18.1 mb in June, dominated by crude while products built.

For summer heat, benchmark crude oil prices bounced back from six-month lows over the course of June after OPEC+ officials stated that unwinding voluntary production cuts would depend on market conditions – and as geopolitical risks remained high. ICE Brent futures rose by $5/bbl to $86/bbl by end-month.

Oil prices increased in June despite mounting concerns over the health of the Chinese economy and slowing oil demand growth. Global observed inventories were up in May for the fourth month in a row, reaching their highest level since August 2021. Offshore inventories moved ashore at a brisk pace, with oil on water down sharply, while on land stocks rose to a 30-month high ahead of the seasonal uptick in refinery activity. OECD industry stocks built for a second consecutive month after having declined for the previous six months. Preliminary data suggest global oil stocks fell 18.1 mb in June, led by a 1 mb/d draw in crude.

Meanwhile world oil consumption in China, long the engine of global oil demand growth, contracted in both April and May, and is now assessed marginally below year earlier levels in 2Q24. That stands in stark contrast to annual gains of 1.5 mb/d in 2023 and 740 kb/d in 1Q24. Demand for industrial fuels and petrochemical feedstocks was particularly weak. By contrast, 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.

At the same time, global oil supply trended higher, with 2Q24 production up 910 kb/d from 1Q24, led by the United States. Output is forecast to rise by another 770 kb/d in 3Q24 with non-OPEC+ providing 600 kb/d of the gains. For 2024 as a whole, global oil supply growth is forecast to average 770 kb/d, which will boost oil supply to a record 103 mb/d. Non-OPEC+ output is expected to rise by 1.5 mb/d, while OPEC+ production will fall by 740 kb/d year-on-year if existing voluntary cuts are maintained. Global supply growth in 2025 is projected at a much stronger 1.8 mb/d, with non-OPEC+, mainly in the United States, Canada, Guyana and Brazil, leading gains for a third consecutive year, adding 1.5 mb/d.

In early June, OPEC+ laid out a roadmap for unwinding extra voluntary supply reductions of up to 2.2 mb/d from 4Q24 through 3Q25. Given the bloc’s assurances that the production increase can be paused or reversed subject to market conditions, we will adjust our OPEC+ supply numbers when such a decision is confirmed. The OPEC+ Joint Ministerial Monitoring Committee is meanwhile due to meet on 1 August to review global oil market conditions and production levels. Our current non-OPEC+ supply and global demand forecasts show the call on OPEC+ crude at 42.2 mb/d in 3Q24 and 41.8 mb/d in 4Q24 – roughly 800 kb/d and 400 kb/d above its June output, respectively. For next year, the call on OPEC+ crude tumbles to 41.1 mb/d as demand growth continues to slow and non-OPEC+ output continues to expand. After the hot summer, cooler trends are set to prevail – international news agencies had disclosed.

OPEC+ crude oil production
million barrels per day