Analysts warn that global oil demand growth needs to accelerate in the coming months to effectively absorb the increase in oil supply that OPEC+ plans to implement starting in October. Recent data indicates that oil demand growth from major consumers like the United States and China has not met expectations, raising concerns as fears of a U.S. recession have triggered a sell-off in global stocks and bonds.
If economic conditions worsen, oil demand growth is likely to slow further, which would force OPEC+ to reconsider its planned production increases or accept lower prices for higher supply. Gary Ross, CEO of Black Gold Investors, noted that given the current economic risks, it is unlikely OPEC+ will proceed with its planned increases in October.
As of August, oil prices have dipped below $80 per barrel, which is lower than what many OPEC+ members require to balance their budgets. Neil Atkinson, an independent analyst, highlighted the downside risks to oil demand due to concerns over the economies of both China and the U.S., suggesting that prices may struggle to rise significantly if demand does not meet expectations.
For the first seven months of 2024, China’s crude imports averaged 10.89 million barrels per day, down 2.4% from the previous year. The decline in diesel consumption, attributed to the rise of LNG-powered trucks and a sluggish economy, is impacting overall fuel demand. In contrast, U.S. oil consumption has increased by 220,000 bpd year-on-year, but it still needs to accelerate to meet the government’s forecast of 20.5 million bpd for 2024.
Given the variability in demand estimates from respected analysts at OPEC and the International Energy Agency, it remains uncertain whether global demand will reach the necessary levels to absorb the additional supply this year.