Global oil demand continues to slow amid EV boom and economic headwinds

World oil demand decelerated in the second quarter, with growth easing to 710,000 barrels per day (bpd) year-on-year, driven by rising adoption of electric vehicles and economic headwinds, an analysis showed. 

In its latest report, the International Energy Agency (IEA) said that demand growth in the second quarter was also the slowest increase since the fourth quarter of 2022. 

The think tank also forecast an oil demand growth of 970,000 bpd in 2024, largely unchanged from its outlook last month.

The projection made by the energy agency contradicts the view of OPEC, with the oil producers’ alliance expecting strong demand growth in 2024 and 2025.

In its monthly report on June 10, OPEC noted that world oil demand will rise by 2.25 million bpd and 1.85 million bpd in 2024 and 2025, driven by markets including China, the Middle East, India, and Latin America. 

Outlining the reasons for its lower estimate, the IEA report said: “Chinese consumption contracted, as the country’s post-pandemic rebound has run its course. Global gains are forecast to average just below one million bpd in 2024 and 2025, as subpar economic growth, greater efficiencies and vehicle electrification act as headwinds.”

It added: “Demand for industrial fuels and petrochemical feedstocks was particularly weak.” 

The energy think tank further revealed that the global oil supply rose by 150,000 bpd to 102.9 million bpd in June. 

The analysis also projected global refinery throughputs rising by 950,000 bpd to 83.4 million bpd in 2024, and by 630,000 bpd to 84 million bpd next year. 

Amid IEA’s projected slowdown in oil demand growth, OPEC is optimistic about the future, and the producers’ alliance believes its forecast is more accurate. 

Speaking at the International Economic Forum in June, Haitham Al-Ghais, secretary-general of OPEC, said that the world will witness continued oil demand driven by a rebound in the travel and tourism sector. 

He also added that OPEC is working to ensure supply, stability, and resilience of the oil market. 

“It is important to remain focused on the fundamentals. We look at economic growth, We look at supply, we look at demand, and yes, we do still believe demand for oil is good and resilient,” said Al-Ghais. 

He added: “Last year, OPEC’s forecast for oil demand was the best. And all those who criticized OPEC’s forecast kept adjusting their number throughout the year.”