Estimate of 1.2 million dropped to 1.1 million barrels per day; bank cites changing economic conditions as one reason
THE Morgan Stanley revised down its projection for global oil demand growth in 2024, from 1.2 million to 1.1 million barrels per day. This change is due to multiple factors, including slower economic growth in key markets, increased adoption of alternative energy sources and changes in global economic conditions.
China’s economic growth is below expectations, significantly affecting its oil consumption. As one of the world’s largest oil consumers, China’s slowdown is a crucial factor in this downward revision.
The dramatic increase in sales of LNG-powered trucks in China has resulted in a marked reduction in demand for diesel. This shift is estimated to reduce China’s oil demand growth by 100-150 kb/d in 2024.
The Asian country’s surge in new electric vehicles, now accounting for nearly half of all new auto sales, is further reducing demand for gasoline.
“We estimate that the displacement of diesel by LNG trucks has reduced China’s oil demand growth this year by an additional 100-150 kb/d,” analysts said.
High inflation, rising interest rates and geopolitical tensions are weighing on economic growth, especially in developed markets, contributing to a more subdued outlook for global oil demand.
The transition to alternatives to petroleum is happening faster than anticipated in certain industries, affecting demand across a range of sectors.
The continued growth of electric vehicles, combined with advances in battery technology and infrastructure, is gradually reducing dependence on oil, especially in the transportation sector.
The adoption of LNG, particularly in heavy-duty transportation and industrial applications, continues to reduce demand for oil.
Supply growth from non-OPEC countries has slowed to a near standstill in recent months. This trend has contributed to a tighter-than-expected oil market in the near term.
While the bank expects non-OPEC supply to accelerate in coming months, it is cautious about whether it will be in line with previous growth projections.
OPEC’s continued production cuts have been essential to maintaining market balance. However, the expected reduction in demand, coupled with increased supply in late 2024, could result in a surplus by 2025.
As the market heads towards the end of 2024 and into 2025, the balance between OPEC and non-OPEC supply will be crucial in shaping oil price dynamics.
BRENT OIL
Morgan cut its Brent crude price forecast, pointing to a faster-than-expected appreciation on weaker fundamentals in 2025. Brent is now expected to average around $80 per barrel in the fourth quarter of 2024.
Prices are expected to gradually decline to around R$75 per barrel by mid-2025, reflecting the expected easing in market conditions.
The recent drop in Brent prices to around R$76 per barrel highlights the anticipatory nature of the market, as traders anticipate weaker demand and an increase in supply.
With information from Investing Brazil.
#Morgan #Stanley #cuts #oil #demand #forecast