The Organization of the Petroleum Exporting Countries (OPEC) recently adjusted its forecast for global crude oil demand growth in 2024, lowering the estimate to 2.11 million barrels per day (bpd) from its previous figure. This represents a decrease of 140,000 bpd, reflecting “softening expectations for China’s oil demand growth in 2024.”
China’s Demand and OPEC’s Expectations
Despite the adjustment, OPEC’s forecast still anticipates that China will be a significant driver of global demand growth. The latest projection expects China’s oil demand to increase by 700,000 bpd in 2024, accounting for roughly one-third of the global increase. This forecast is only slightly reduced by 60,000 bpd from the previous estimate.
However, reconciling this forecast with current data presents challenges. China’s crude oil imports have been weaker in the first seven months of the year compared to the same period in 2023. July’s import levels fell to 9.97 million bpd, the lowest since September 2022, and a decrease from June’s 11.3 million bpd. Year-to-date figures show a 2.9% decline in imports compared to the previous year, suggesting a significant drop of about 320,000 bpd.
Demand vs. Imports: A Complex Picture
While imports are a major component of total oil demand, they are not the sole factor. Domestic production, inventory movements, and net exports of refined fuels also play a role. China’s domestic oil production for the first half of 2024 was 4.39 million bpd, an increase of 1.9% from the same period in 2023. However, this increase may exacerbate the supply-demand imbalance.
China’s inventory levels also play a crucial role. An estimated 900,000 bpd were added to inventories in the first half of the year, indicating that the country has not been drawing from these reserves to meet demand. This suggests that current consumption patterns are not aligned with OPEC’s optimistic forecast.
Economic Context and Potential Recovery
The broader economic environment in China presents further uncertainty. The key construction sector remains sluggish, manufacturing indexes show contraction, and retail sales growth has slowed. Although there may be some economic acceleration in the fourth quarter due to stimulus measures from Beijing, it is uncertain whether this will be sufficient to meet OPEC’s demand expectations.
Implications for OPEC+
If OPEC’s adjusted forecast proves insufficient and China’s oil demand does not show a significant uptick, it is likely that OPEC+ will reconsider its plans to unwind output cuts. OPEC+ had previously announced a plan to begin unwinding the most recent 2.2 million bpd cut from October but also indicated that this process could be paused or reversed if necessary.
In summary, while OPEC’s reduced demand forecast for 2024 still expects significant contributions from China, current data and economic conditions present challenges. The outcome of this forecast will heavily depend on China’s demand recovery in the latter part of the year and the potential adjustments by OPEC+ based on evolving market conditions.
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