India Set to Surpass China in Oil Consumption in 2024

India is on track to outpace China in oil consumption growth for the first time in 2024, with an anticipated increase of 200,000 barrels per day (BPD), according to recent projections by the International Energy Agency (IEA). This development marks a significant shift in global oil demand dynamics, driven by India's growing energy needs and a simultaneous slowdown in Chinese demand.

The global oil market is currently facing challenges with weaker-than-expected demand from China and reduced Russian exports, leading to a notable decline in crude prices. ICE Brent futures, a key benchmark for global oil prices, recently fell by $10 per barrel to approximately $70, marking the lowest price since late 2021. This drop follows a peak of $90 per barrel in April and reflects concerns over economic uncertainties and tepid demand.

Investor sentiment in the oil market has also turned bearish, with net speculative exchange holdings reaching multi-year lows. A combination of slowing demand, particularly from China, and an oversupply of crude has weighed heavily on global oil prices.

China's Declining Oil Demand

China, which has traditionally been one of the largest consumers of oil, has experienced a decrease in consumption for four consecutive months. The country's oil demand growth is now expected to be limited to just 180,000 BPD in 2024, as economic challenges and the rising adoption of electric vehicles (EVs) reduce its dependence on traditional fossil fuels. This slowdown marks a stark contrast to previous years when China was a driving force behind global oil demand growth.

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India's Rising Demand and Strategic Moves

In contrast, India is expected to witness the largest increase in oil consumption globally in 2024. India's demand growth comes on the heels of its emergence as the top buyer of Russian oil, a position it secured by surpassing China in July 2023. Despite a seasonal decline in demand of 300,000 BPD in August, India's overall oil consumption trajectory remains upward, with an additional 230,000 BPD projected for the year.

India's rising demand is partly due to its growing reliance on imported oil, which accounts for over 80% of its total needs. This has prompted the country to strengthen its energy security through strategic partnerships. India's Oil Secretary, Pankaj Jain, recently announced efforts to encourage Russia to increase oil production to meet the country's rising fuel needs.

Global Oil Demand Trends and Challenges

While India's demand growth is a bright spot, the broader global oil market remains subdued. Many advanced economies are experiencing shrinking oil deliveries due to reduced consumption and a growing reliance on alternative energy sources. The IEA has projected that global oil demand will likely plateau by the end of the decade, with the increasing adoption of renewables and energy efficiency measures playing a crucial role.

However, emerging markets like India, Brazil, and others are expected to continue driving demand growth in the coming years, offsetting declines in more developed regions. For instance, Russia's oil exports fell by 290,000 BPD in August, the lowest level since March 2021, further complicating global supply dynamics. Meanwhile, modest production increases from countries like Guyana and Brazil have helped offset some of the disruptions caused by supply issues in Libya and Norway.

Outlook for Global Oil Supply and Demand

Looking ahead, the IEA expects global oil supply to grow at a subdued pace in 2024, while demand growth is projected to remain tepid, reflecting broader economic challenges and a shift toward renewable energy. The Organization of the Petroleum Exporting Countries (OPEC) has also revised its demand forecast downward to 2.03 million BPD, citing economic slowdowns and real data from the first half of 2024.

Despite these adjustments, OPEC remains optimistic that stronger demand growth in markets like India and Russia will help offset any further declines in Chinese demand. The continued evolution of global oil demand patterns will depend heavily on economic conditions, technological advancements, and policy shifts towards sustainable energy sources.

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India’s growing role in the global oil market reflects its increasing economic influence and energy needs. As the country continues to grow and urbanize, its energy consumption patterns are likely to remain a key factor in shaping global oil markets for years to come.

Source: CNBC-TV18