Crude Flat On Speculation That China's Oil Demand May Have Peaked

The IEA says China's post-Covid pent-up demand now complete: File Image/Pixabay

Another day, another session of choppy crude trading on Thursday, spurred mainly by the disclosure  that oil consumption in China this year will grow just 10 percent of the rate seen in 2023.

Brent settled up 28 cents at $72.56 per barrel, while West Texas settled up 27 cents at $68.70; Brent and WTI were on track to lose about 1.7 percent and over 2 percent for the week, respectively.

As if to further aggravate the bears, the International Energy Agency reported that its calculation of China’s 2024 consumption rate follows six straight months of consumption contraction, and that global oil markets face a surplus of more than 1 million barrels per day (bpd) next year or worse, if the Organization of the Petroleum Exporting Countries (OPEC) decides to implement its plans to revive suspended production.

Toril Bosoni, the IEA’s head of oil industry and markets, told media that China’s oil demand may have even peaked: “It’s not just the economy and the shift, the slowdown in the construction sector, it’s the transition to electric vehicles, high speed rail and gas in trucking that is undermining Chinese oil demand growth.”

An IEA report stated, “The sub-1 million barrel-a-day growth pace for [2024/25] reflects below-par global economic conditions with the post-pandemic release of pent-up demand now complete,” and that “rapid deployment of clean energy technologies is also increasingly displacing oil in transport and power generation.”

The IEA follows UBS slashing its price forecast for Brent to $80 per barrel from $87 previously due to weakening Chinese demand, and OPEC on Tuesday cutting its demand growth forecast for the fourth month in a row.

Rebecca Babin, senior energy trader at CIBC Private Wealth, said of China’s attempt to rectify its economy and U.S. president-elect Donald Trump effect on that country, "We're not seeing any improvement: they're not bringing out enough fiscal stimulus….we're going to also be battling potential tariffs; we're also going to have a stronger dollar."

Contributing to Thursday’s gloom was the Energy Information Administration reporting a bigger than expected U.S. stockpile build: a rise of 2.1 million barrels last week, much more than  expectations for a 750,000 barrel increase.

Traders largely ignored further data showing that U.S. gasoline stocks fell unexpectedly last week to a two-year low due to a surge in demand, although the news was was credited by some for lifting Brent and WTI out of negative territory towards the end of the Thursday session.