Or is there still a robust demand for oil ahead?
Oil pundits are fiercely debating the future of crude demand. The International Energy Agency (IEA) noted that world oil demand growth has slowed, with 2Q24 showing the slowest increase since 4Q22. It projects global crude demand to grow below one million barrels per day (bpd) in 2024 and 2025, citing subpar economic growth, efficiencies, and vehicle electrification as headwinds.
Only last month, the IEA projected that global crude demand would peak by 2030 at the latest.
China, the world’s largest demand growth driver, is slowing down, impacting the overall demand-supply equation. Chinese crude oil imports have trended lower than expected since the start of the year, and supertankers headed for China have dropped to the lowest in almost two years.
Sinopec, the Chinese state energy giant and the world’s biggest refiner, reported in May that it expected demand growth in China to peak in three years. The company cited growth in EV sales as the reason for its forecast and said that by 2045, the country’s energy mix would be dominated by non-hydrocarbon sources.
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Another indication of slowing demand came from the Joint Organizations Data Initiative (JODI), the statistical arm of the Riyadh-based International Energy Forum. According to the latest JODI report, consumption in the 53 countries covered by JODI was up year-on-year by less than one million barrels per day to the end of 1Q24. The IEA demand growth projection is also below one million bpd for the year.
Oil major BP is also predicting that the world’s demand for oil will peak next year, bringing an end to rising global carbon emissions by the mid-2020s amid a surge in wind and solar power.
The energy company’s influential outlook report now insists that oil use will increase by about two million bpd to peak at about 102 million bpd in 2025. However, it insists that delaying the clean power transition could be “costly” as oil would continue to “play a significant role in the global energy system for the next 10 to 15 years.”
However, the Organization of the Petroleum Exporting Countries (OPEC) continues to maintain a robust oil demand forecast for 2024. OPEC+ predicts global oil demand to grow by 2.25 million bpd, driven by expectations of continued economic expansion and a resurgence in air travel.
OPEC’s optimistic market forecast has some backing. Recently, EV adoption has slowed. Tesla, the top-selling electric vehicle maker, reported lower-than-expected deliveries in the second quarter. A McKinsey report shows that nearly half of American EV drivers would consider switching back to internal combustion engine vehicles. Globally, in the 15 countries McKinsey surveyed, 29 percent of EV drivers expressed a similar sentiment.
Last Tuesday, the U.S. Energy Information Administration (EIA) also raised its 2024 demand estimate to 1.11 million bpd – up from 1.08 million bpd – while raising the 2025 estimate from 1.53 million bpd to 1.77 million bpd, noting that the global oil market is heading for a supply deficit next year. According to British multinational bank Standard Chartered, May oil demand growth clocked in at a robust 1.787 million bpd.
The Energy Institute is also reporting healthier demand growth. The Institute reported that countries burnt record amounts of oil and coal last year, sending global fossil fuel consumption and emissions to all-time highs. Global crude oil demand grew 2.6 percent, surpassing 100 million bpd for the first time. Meanwhile, the share of fossil fuels in the energy mix declined slightly by half a percentage point but still made up more than 81 percent of consumption.
Energy trends are complex and influenced by numerous variables. Despite fluctuations, a trend toward reducing fossil fuel consumption is emerging. The trillion-dollar question remains: when will fossil fuel consumption significantly decline?
Toronto-based Rashid Husain Syed is a highly regarded analyst specializing in energy and politics, with a particular emphasis on the Middle East. In addition to his contributions to local and international newspapers, Rashid frequently lends his expertise as a speaker at global conferences. Organizations such as the Department of Energy in Washington and the International Energy Agency in Paris have sought his insights on global energy matters.
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