The world’s demand for oil is growing at its slowest pace since the height of the Covid-19 pandemic, causing global market prices to slump to three year-lows, the International Energy Agency has said.
The global energy watchdog used its closely watched monthly report to warn the industry that oil market prices could continue to fall as the leading producers kept pumping out more crude than the world could consume.
The Paris-based agency said global oil demand increased by 800,000 barrels a day in the first half of the year. That was the equivalent to just over a third of the growth recorded in the same period last year, and was the smallest increase since 2020.
Overall, demand this year is expected to reach 103m barrels a day (mb/d). In August, the world’s oil-producing countries produced 103.5mb/d. The oversupply risks creating a glut of oil in the market. A barrel of crude has already slumped below $70 (£54) to lows not seen since the global economy began recovering from the pandemic.
The slow growth in global oil demand was attributed to the weakening of the Chinese economy. Demand for oil in China has decreased for four months in row this year. The IEA expects it to begin rising again, but at a slower pace than in recent years because of the country’s progress in removing fossil fuels from its transport sector.
A surge in electric vehicle (EV) sales in China has reduced the country’s demand for road fuels, while the government’s rollout of a vast national high-speed rail network has begun to reduce growth in domestic air travel, according to the report.
The IEA has estimated that China’s switch to EVs will outpace that in the west by the end of the decade, with almost one in three cars on Chinese roads being electric by 2030, compared with almost one in five in the US and EU.
The agency said weak economic growth in the world’s advanced economies could result in global oil demand this year being almost 2mb/d below pre-pandemic levels.
“With the steam seemingly running out of Chinese oil demand growth, and only modest increases or declines in most other countries, current trends reinforce our expectation that global demand will plateau by the end of this decade,” it said.
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The IEA has predicted that the world’s demand for oil, gas and coal will begin to decline this decade in “the beginning of the end” of the fossil fuel era. Oil demand could reach highs of 105.7mb/d by 2028, it predicted, but it would probably plateau at this level before beginning a slow decline.
The findings stand in contrast to forecasts produced by Opec+. The oil cartel also reduced its predictions for oil demand this year, but they remain more than double the IEA’s forecasts.