Asia's crude oil imports decreased slightly in the first half of 2024 compared to the same time the previous year, going against predictions that the region with the highest consumption would drive a rise in global demand. According to statistics published by LSEG Oil Research, Asia imported 27.16 million barrels per day (bpd) of oil during the January'June period, a slight decrease of 130,000 bpd from the 27.29 million bpd in the same period in 2023. Reduced arrivals in China, the world's largest oil importer, contributed significantly to the somewhat weaker result; advances by India, Asia's second-largest customer, were insufficient to counteract China's weakness.
The initial half of Asia's crude oil imports did not expand, which somewhat undermines the 2024 demand projections from major industry groups such as the International Energy Agency (IEA) and the Organization of the Petroleum Exporting Countries (OPEC). Of course, imports are only one component of overall demand; others include domestic oil production and changes in inventory levels.
However, given the region's reliance on oil coming in tankers or via pipelines from Russia and central Asia in the case of China, imports remain the primary driver of demand in Asia. It is a given that Asia's imports, particularly those for China, will need to be robust in the second half of the year in order to meet the demand projections provided by the IEA and OPEC.
In contrast to the IEA's projection of a 500,000 bpd expansion, OPEC's June monthly oil market report predicted that China's oil demand will increase by 720,000 bpd in 2024 over 2023. But in the first half, China's imports were estimated to have been around 11.08 million bpd based on official customs figures for the first five months and LSEG's June prediction.
Compared to the customs figure of 11.38 million bpd for the first half of 2023, this is a 300,000 bpd decrease. Given how weak China's imports appear to be, it is worthwhile to investigate if local output is making up the shortfall. During the first five months of this year, domestic output reached 4.28 million bpd, increasing 1.8%, or over 140,000 bpd, from the same time in 2023.
Put another way, the increase in local output offsets the decline in imports of crude oil by just less than half. In Asia, India appears to be a considerably brighter light. Based on official and LSEG statistics, estimates show that oil imports into India in the first half of 2024 were around 4.94 million bpd. This is a 90,000 bpd increase from the official figure of 4.85 million bpd for the first half of 2023.
However, when one considers the 7.8% year-over-year growth rate in the first quarter of the economy, this comparatively minor increase in India's imports appears less spectacular. Additionally, it is operating at a slower pace than the OPEC prediction that India's demand will rise by 230,000 bpd over the course of 2024. As a result, a robust second half will be required if the exporting group's projection is to be correct.
OPEC projects that the total demand for petroleum in Asia in 2024 will be higher than it was in the previous year by 1.3 million barrels, with 720,000 barrels coming from China, 230,000 from India, and 350,000 from the remainder of the continent. Asia's consumption is predicted by the IEA to increase by 900,000 bpd in 2024, with 500,000 bpd coming from China and 400,000 bpd for the rest of the continent.
But with imports actually dropping in the first half by 130,000, it leaves a mountain to climb in the second half. The question for the markets is whether there is confidence that China's economy will rebound in the second half and that the rest of Asia will enjoy stronger economic growth as well. If the assumption is that OPEC and its allies in the broader OPEC+ group are successful in keeping oil prices above $80 a barrel, then it follows that only robust economic growth will lead to higher demand for crude.
