Oil demand not rising fast enough to absorb OPEC+ hikes
August 11, 2024
News Digest:
Global oil demand growth needs to rise substantially over the next few months for it to absorb the increase in oil supplies planned by OPEC+ from October. A news report quoted market data to suggest that growth till July from the US and China has failed to meet expectations, which dipped further over fears of a recession.
In case of a further slowdown of the economy, oil demand growth would slow down, which will put pressure on OPEC+ to delay its plans to ramp up output or accept lower prices for higher supply. Analysts fear that it is unlikely that the group will go ahead with the planned October supply increases.
Takeaway:
Prices have fallen below the $80 per barrel mark in August, which is lower than what members of the grouping as well as Russia require to balance their budgets, bringing a real downside risk into play.
Till July, China’s crude imports totaled 10.89 million barrels per day, which is down 2.4% year-on-year. During the same period, US oil consumption rose by 220,000 barrels to an average of 20.25 million, which analysts feel needs to rise further over the next couple of months. However, the second half of the year sees higher consumption due to the peak driving season, Northern Hemisphere harvests, and winter purchases.