Morgan Stanley Lowers Global Oil Demand Forecast for 2024

Morgan Stanley has revised its forecast for global oil demand growth in 2024 down to 1.1 million barrels per day from 1.2 million barrels per day.

Reasons for Revision

This adjustment is attributed to various factors:
– Slower economic growth in key markets
– Increased adoption of alternative energy sources
– Evolving global economic conditions

Impact of China

China’s economic growth has been slower than anticipated, significantly impacting its oil consumption. As one of the largest consumers of oil globally, this slowdown is critical to the downward revision.

• The rapid increase in the sale of LNG trucks in China has led to a significant decline in diesel demand. This shift is expected to reduce China’s oil demand growth by 100-150 kb/d in 2024.
• The proliferation of NEVs (New Energy Vehicles) in China, now comprising nearly 50% of all new car sales, is further eroding gasoline demand. Analysts estimate that the displacement of diesel by LNG trucks has resulted in a reduction of oil demand growth by another 100-150 kb/d this year.

Economic Influences

High inflation, rising interest rates, and geopolitical tensions are dampening economic growth, particularly in developed markets. This creates a more subdued outlook for global oil demand.

Certain industries are experiencing a faster-than-expected transition towards alternatives to oil, impacting demand across various sectors.

• The ongoing rise of EVs (Electric Vehicles), along with advancements in battery technology and infrastructure, is gradually reducing reliance on oil, especially in transportation.
• The adoption of LNG, especially for heavy-duty transportation and industrial uses, is contributing to the decrease in oil demand.

Supply Trends

Non-OPEC supply growth has slowed, nearly stalling in recent months, leading to a tighter-than-expected oil market in the short term. While Morgan Stanley anticipates that non-OPEC supply will reaccelerate, there is caution about aligning with previous growth projections.

OPEC’s Role

OPEC’s ongoing production cuts have been crucial for maintaining market balance. However, with anticipated softening demand and increased supply in late 2024, a surplus could occur in 2025.

As the market approaches the end of 2024 and into 2025, the balance between OPEC and non-OPEC supply will be vital for oil price dynamics.

Price Forecasts

Morgan Stanley has lowered its Brent crude price forecasts, citing quicker-than-expected weakening fundamentals for 2025. Brent is now projected to average around $80 per barrel in Q4 2024, with prices expected to decline to approximately $75 per barrel by mid-2025, reflecting anticipated easing market conditions.

The recent dip in Brent prices to around $76 per barrel highlights the market’s forward-looking nature as traders expect softer demand and increased supply.