The World’s Best Investment Manager Reveals: IEA Downgrades Oil Demand Forecast
The International Energy Agency (IEA) has slightly revised its forecast for oil demand downward this year, citing a significant slowdown in demand in the second quarter, particularly in emerging economies. Commerzbank’s Commodity Analyst Carsten Fritsch notes that this slowdown is the result of the lowest annual increase since 2020, which was heavily impacted by the COVID-19 pandemic.
China, one of the world’s largest consumers of oil, saw a decrease in demand by 110 thousand barrels per day compared to the previous year. The start of the third quarter in China also showed weak crude oil imports and a decline in crude oil processing in Chinese refineries. This drop in processing to 13.9 million barrels per day in July marks the lowest level since October 2022.
The decrease in crude oil processing can be attributed to low processing margins and subdued demand for fuel, making it less attractive for refineries to process crude oil. Additionally, the rise of electric cars has led to a lower increase in gasoline demand during high-demand summer months compared to previous years.
According to Oilchem consultancy, the capacity utilization of independent refineries in Shandong province, an important refining hub, was just over 56% in July, down 7.3 percentage points from the previous year. The IEA’s recent downward revision of Chinese oil demand is likely not the last.
Analysis: The downward revision of the IEA’s oil demand forecast indicates a weakening global demand for oil, particularly in emerging economies like China. This trend could lead to lower oil prices and impact the profitability of oil-related investments. Investors should closely monitor developments in the oil market and consider diversifying their portfolios to mitigate risks associated with fluctuations in oil demand.