China’s oil demand growth is projected to stay weak in 2025, despite recent stimulus efforts from Beijing, as the world’s second-largest economy shifts towards electric vehicles and experiences slower economic growth.
China, earlier accounted for more than 60% of global oil demand growth in the last decade when its economy grew at 6.1% on average, IEA Executive Director Fatih Birol said on the sidelines of the Singapore International Energy Week conference.
“The Chinese economy at around 4% (growth) or so would mean China will need less and less energy,” he also added that demand for electric vehicles, which have become competitively priced compared to conventional cars, will continue to increase.
“The impact of the stimulus has not been as significant as some of the market observers have expected,” Birol said.
“It is still limited. And as we see today, it will be very difficult to see a major uptick of Chinese oil demand.”
Global oil prices are hovering around $70 per barrel, following a decline of over 7% last week, despite escalating geopolitical tensions in the Middle East.
“One of the two reasons why we saw a muted reaction in oil prices is that demand is weak this year and the expectation that it will be weak next year,” Birol said, noting that Chinese oil demand would have been flat this year if it was not for petrochemicals.
Another factor capping oil prices is the rise of supply from non-OPEC producers – the U.S., Canada, Brazil and Guyana – which is higher than global oil demand growth, he added.
On expectations of OPEC+, to unwind production cuts in 2025, Birol said it is up to OPEC to decide on that.
“What I see is there will be a surplus next year of oil in the markets if there are no major changes in the geopolitical context,” he said.
OPEC on Oil Demand
Earlier this week, OPEC has once again revised its global oil demand growth forecasts for both 2024 and 2025, marking the third downward adjustment. The revisions were attributed to updated actual data and a slight dip in demand expectations across certain regions.
In its October monthly report, OPEC lowered its 2024 global oil demand growth forecast by 106,000 barrels per day (b/d), bringing the total to 1.9 million b/d. The group also cut its 2025 demand growth outlook by 102,000 b/d to 1.6 million b/d, noting that non-OECD countries will be the primary drivers of demand growth next year.
The report highlights that non-OECD demand is expected to increase by around 1.5 million b/d year-on-year in 2025, with China, other Asian countries, the Middle East, and India contributing to the rise.
Despite these downward revisions, OPEC emphasized that oil demand remains robust, exceeding the pre-pandemic historical average of 1.4 million b/d. This strong demand is supported by factors such as increased air travel, road mobility, and industrial, construction, and agricultural activities.
On the supply side, OPEC maintained its forecast for non-OPEC supply growth at 1.2 million b/d in 2024, driven by the U.S., Canada, and Brazil. By 2025, non-OPEC supply growth is expected to reach 1.1 million b/d, bolstered by the same countries, along with Norway.
OPEC left its global economic growth projections for 2024 and 2025 unchanged at 3% and 2.9%, respectively, while slightly raising its U.S. economic growth estimate for this year to 2.5%.
