Economic uncertainty in China is having a crude effect on the global energy outlook. OPEC’s latest monthly oil market report says that it now expects the world to use up 2.1 million barrels of oil a day more than it did last year, instead of the 2.2 million barrels per day it had forecasted.
“This slight revision reflects actual data received for 1Q24 and in some cases 2Q24, as well as softening expectations for China’s oil demand growth in 2024,” the body said.
It’s not that industrial output is expected to fall. Instead, the constraint is coming from China’s consumer sector, where a slowdown in housing and office building investment are squeezing discretionary spending. Plus, another key user base is slowly drying up.
“Headwinds in the real estate sector and the increasing penetration of LNG trucks and electric vehicles are likely to weigh on diesel and gasoline demand,” OPEC’s report said.
China figures prominently in a couple other major oil industry storylines. Reuters reports that Saudi Aramco, the world’s largest oil company, said that it expects to start sending fewer barrels to China in response to that expected softening in demand. Iran, another major supplier, is sneaking around U.S. sanctions by shipping supplies to China and bumping exports to their highest levels since 2018 in the process.