India is set to lead global oil demand growth in 2024, surpassing China for the first time. The country's oil consumption is expected to rise by 200,000 barrels per day, signaling a positive trend amid global challenges. Factors like reduced oil exports from Russia and weaker Chinese demand have led to a drop in oil prices. India's emergence is fueled by robust consumption patterns, while China faces a downturn due to economic slowdown and a shift towards alternative energy sources.
In a significant shift, India is poised to spearhead global oil demand growth in 2024, surpassing China for the first time, according to the latest report by the International Energy Agency (IEA) released on Thursday. The country is expected to witness a substantial increase of 200,000 barrels per day (kb/d), signaling a positive trajectory amidst a backdrop of global oil demand experiencing its slowest growth since 2020.
The recent drop in oil prices, triggered by weaker-than-expected demand from China and reduced oil exports from Russia, has led to ICE Brent futures plummeting by $10 per barrel in early September, reaching around $70 per barrel—the lowest level seen since late 2021. This decline marks a significant departure from the peak of $90 per barrel recorded in April 2024.
Despite these challenges, investor sentiment and market dynamics have played a role in amplifying bearish trends. Concerns regarding oversupply and subdued demand have weighed heavily on the oil market, as highlighted in the IEA report.
India's emergence as a frontrunner in oil demand growth for 2024 is underscored by robust consumption patterns in emerging markets like Brazil, alongside India's own surge. Pankaj Jain, India's oil secretary, recently expressed the country's intent for OPEC and its allies to increase oil output to meet the rising fuel demand domestically.
India's ascendancy in the global oil landscape is further emphasized by its position as the world's third-largest oil importer and consumer, with over 80 percent of its oil requirements sourced from abroad.
Despite a temporary decline in oil consumption in August attributed to seasonal factors and heavy monsoon rains, India remains on course to witness a substantial rise in oil consumption, with an anticipated increase of 200 kb/d in 2024 and a further 230 kb/d in 2025, as per the IEA projections.
In contrast, China's oil demand has seen a downturn, registering a decline for four consecutive months due to economic slowdown and a shift towards alternative energy sources such as electric vehicles. This transition is reflected in China's expected oil demand growth of only 180,000 bpd in 2024.
Globally, the challenges in oil demand extend beyond China, with many advanced economies experiencing shrinking oil deliveries amidst structural obstacles and sluggish economic growth. The IEA foresees a plateau in global oil demand by the end of the decade, given the slow recovery in consumption patterns.
While global oil supply witnessed fluctuations, with notable declines in Russian oil exports, the IEA anticipates a modest growth in global oil demand for 2024, with a further subdued expansion expected into 2025.
Looking ahead, the IEA projects a strengthening in annual supply gains, with growth forecasted to reach 2.1 mb/d in 2025, although demand growth is expected to remain restrained. OPEC's recent revisions to its oil demand forecast for 2024 align with a nuanced outlook that balances regional dynamics and global economic shifts, with a focus on stable growth in key markets like India, Russia, and Brazil to offset potential declines elsewhere.
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