Invessting.com -- Morgan Stanley (NYSE:MS) has lowered its forecast for global oil demand growth in 2024 to 1.1 million barrels per day from 1.2 million barrels per day.
This revision is attributed to several factors, including slower economic growth in key markets, increased adoption of alternative energy sources, and evolving global economic conditions.
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 a critical factor in the downward revision.
The rapid increase in the sale of LNG trucks in China has led to a marked decline in diesel demand. This shift alone is expected to reduce China's oil demand growth by 100-150 kb/d in 2024.
The proliferation of NEVs in China, now making up nearly 50% of all new car sales, is further eroding gasoline demand. “The displacement of diesel by LNG trucks has reduced China's oil demand growth this year by another 100-150 kb/d, we estimate,” the analysts said.
High inflation, rising interest rates, and geopolitical tensions are dampening economic growth, especially in developed markets. These factors contribute to a more subdued outlook for global oil demand.
Certain industries are seeing a faster-than-expected transition towards alternatives to oil, impacting demand across different sectors.
The continued rise of EVs, coupled with improvements in battery technology and infrastructure, is gradually reducing the reliance on oil, particularly in transportation.
The adoption of LNG, especially in heavy-duty transportation and industrial applications, is further decreasing oil demand.
Non-OPEC supply growth has decelerated, nearly stalling in recent months. This trend has contributed to a tighter-than-expected oil market in the short term.
While Morgan Stanley expects non-OPEC supply to reaccelerate in the coming months, there is caution regarding whether this will align with previous growth projections.
OPEC's ongoing production cuts have been instrumental in maintaining market balance. However, the anticipated softening of demand, coupled with increased supply in late 2024, could lead to a surplus in 2025.
As the market looks towards the end of 2024 and into 2025, the balance between OPEC and non-OPEC supply will be crucial in determining oil price dynamics.
Morgan Stanley has lowered its Brent crude price forecasts, citing faster-than-expected pricing of weaker fundamentals for 2025. Brent is now expected to average around $80 per barrel in Q4 2024.
Prices are forecasted to gradually decline to approximately $75 per barrel by mid-2025, reflecting the anticipated easing of market conditions.
The recent dip in Brent prices to around $76 per barrel underscores the market's forward-looking nature, as traders anticipate softer demand and increased supply.