Commonwealth_ India– India is poised to lead global oil demand growth in 2024, with a forecasted increase of 200,000 barrels per day (kb/d), surpassing China for the first time, according to the International Energy Agency (IEA) in its latest report which was released recently. This shift comes amid a period of sluggish global oil demand growth, the slowest since 2020. A notable decline in oil prices since August, driven by weaker-than-anticipated demand from China and reduced oil exports from Russia, has impacted the market. ICE Brent futures, a key indicator of global oil prices, fell sharply by $10 per barrel in early September, reaching approximately $70 per barrel—the lowest level since late 2021. This represents a significant drop from the April 2024 high of $90 per barrel.
Investor sentiment has worsened the price failure, with net speculative exchange holdings plummeting to multi-year lows. Concerns about oversupply, coupled with weak demand, have significantly influenced the oil market, the IEA report noted. Despite China’s downturn in oil consumption, emerging markets like Brazil and India have sustained strong oil demand. Brazil’s oil consumption growth is driven by its agricultural exports, while India is set to lead in oil demand growth in 2024. In addition, oil secretary Pankaj Jain stated today that India is urging the Organization of the Petroleum Exporting Countries (OPEC) and its allies, including Russia, to increase their oil output in response to rising domestic fuel demand. In July, India overtook China as the leading buyer of Russian oil and remains the world’s third-largest oil importer and consumer, with over 80 percent of its oil needs met through imports.
India’s oil consumption experienced a significant month-on-month (M-o-M) decline of 300 kb/d in August, influenced by seasonal patterns and an unusually heavy monsoon, which was 5 percent above average according to the India Meteorological Department. The usage of gasoil, a crucial fuel for India’s industrial sector, fell by 70 kb/d below estimates, reflecting negative year-on-year growth. Nevertheless, India is anticipated to post the largest increase in global oil consumption in 2024, with a projected rise of 200 kb/d, and a further increase of 230 kb/d expected in 2025, according to the IEA.
China’s oil demand has been on a declining trend for four consecutive months, including a year-on-year drop of 280,000 barrels per day (bpd) in July. This contrasts sharply with the 1 million bpd average growth recorded in the previous 12 months and the 1.5 million bpd surge in 2023. China’s oil demand is now expected to grow by only 180,000 bpd in 2024, due to an economic slowdown and a shift towards alternative energy sources, such as electric vehicles (EVs). The rapid rise in EV sales has reduced road fuel consumption, and the expansion of China’s high-speed rail network has curtailed domestic air travel.
Globally, oil demand growth remains subdued. In the United States, gasoline deliveries experienced a sharp decline in June following unexpected strength in May, with gasoline consumption contracting year-on-year in five of the first six months of 2024. Many advanced economies are also witnessing shrinking oil deliveries due to structural challenges and sluggish economic growth. The IEA estimates that oil use in these economies will remain around 2 million barrels per day (mb/d) below pre-pandemic levels by the end of 2024.
Given the slow recovery in oil demand across most regions and the decline in Chinese consumption, the IEA has reinforced its earlier projection that global oil demand will likely plateau by the end of this decade. Russia’s oil exports fell by 290 kb/d in August, reaching their lowest levels since March 2021. Although crude exports experienced a seasonal decline, product exports remained relatively stable. Russian oil revenues saw a sharp decline, with commercial export revenues dropping by $1.6 billion to $15.3 billion, reflecting a significant reduction from July 2023 levels. Exports to major buyers like India and Turkey also decreased in anticipation of forthcoming refinery maintenance. Ural crude prices fell by $3.50-4.00 per barrel in August, narrowing the price gap with the G7 price cap, while product prices deteriorated faster than crude.
In August, global oil supply increased by 80,000 bpd to 103.5 mb/d, despite disruptions in Libya due to political issues and maintenance in Norway and Kazakhstan. The increase was driven by higher output from countries such as Guyana and Brazil. The IEA forecasts global oil demand to expand by an average of 900,000 bpd in 2024, a reduction of 70,000 bpd from last month’s estimate. Growth is expected to continue at this moderate pace into 2025, reaching 103.9 mb/d.
The IEA also expects annual supply gains to strengthen, with growth projected to reach 2.1 mb/d in 2025, although demand growth is anticipated to remain subdued. In its latest Oil Market Report released on September 10, OPEC revised its global crude oil demand forecast for 2024 to 2.03 million bpd, down from earlier estimates. This revision, the second consecutive downward adjustment, reflects both real data from the first half of 2024 and concerns over China’s economic slowdown. However, the September report remains optimistic, noting that stronger growth in India, Russia, and Brazil is expected to offset any further declines in Chinese demand.
