Why OPEC is downgrading its demand forecast for the 3rd time in 3 months
OPEC is now forecasting that demand for oil will grow more slowly than it had previously expected for the rest of this year and for 2025. It’s the third time in as many months that the Organization of the Petroleum Exporting Countries has downgraded its forecast.
The world uses more than 100 million barrels of oil every single day. And next year, it’ll use even more. But OPEC sees demand growing more slowly in the coming year in one key place: China.
“Demand concerns there tend to overshadow almost anything else that happens,” said Tom Seng with the Ralph Lowe Energy Institute at Texas Christian University.
That’s because China imports more crude oil than any other country in the world, he said. And right now, it’s having economic problems.
“And obviously economic woes, they almost always equate to less energy demand,” Seng said.
In addition to China’s current economic troubles, it’s also moving much more quickly than many other countries to adopt electric cars, said Matt Smith at the data and analytics firm Kpler.
“So that’s starting to really impact gasoline demand,” he said.
At the same time, he said, China is also transitioning many of its commercial trucks over to liquefied natural gas, or LNG, and away from diesel.
“And so we’re expecting both gasoline demand to be peaking around this year into next year, and then diesel demand in the country to peak,” Smith said. “And so suddenly, from a country that was the engine room of the global market, you’re seeing them really slowing now.”
Demand for diesel is also weakening in countries besides China, including the United States, according to Bob McNally at the consulting firm Rapidan Energy Group.
“And diesel fuel is the fuel that’s most closely linked with general economic activity, because diesel is used in trucks, and some shipping, and airplanes, and freight, and things like that,” he said.
So, he said, slowing demand for diesel could be a sign of slowing economic growth.