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OPEC cuts oil demand growth forecast for third month in a row

2024-10-15

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OPEC has lowered its forecast for world oil demand in 2024 and 2025 for the third consecutive month, arguing that its forecasts still reflect healthy, above-average growth.

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In its latest monthly oil market report, the organization said that global oil demand growth will be 100,000 barrels per day less than the September forecast, with the new forecast being 1.93 million barrels per day in 2024 and 1.64 million barrels per day in 2025.

OPEC said the downward revision was due to lower-than-expected consumption in some regions, but the organization noted that demand growth data was "well above the historical average of 1.4 million barrels per day before the COVID-19 pandemic."

The so-called "call" for OPEC+ crude production -- the amount the group and its allies need to produce to balance supply and demand -- reportedly puts output at 42.8 million bpd in 2024 and 43.2 million bpd in 2025, still well above the 40.1 million bpd the alliance produced in September, especially after cuts in Libya and Iraq, which saw output fall by 530,000 bpd month-on-month.

This should give the OPEC+ group some room to increase output in the coming months, as it plans to do so from December.

But the outlook is far more optimistic than many other forecasters, such as the International Energy Agency (IEA), which will release its latest market report on October 15. In September, it expected global oil demand to grow by 900,000 bpd in 2024.

Nonetheless, OPEC's adjustments are significant, suggesting the group has recognized that tough times may lie ahead as escalating tensions in the Middle East have failed to outweigh market expectations of weaker fundamentals in 2025, preventing a breakout in oil prices.

Since July, OPEC has cut its global demand forecasts by 530,000 bpd for 2025 and 320,000 bpd for 2024, and demand growth forecasts for non-OPEC countries have also taken a hit, even as production growth has remained stable.

Significant volatility

OPEC+ has been working to support oil markets in recent months as wars in the Middle East and Europe have fueled sharp volatility in the oil market.

Military escalation between Israel and Iran and its proxies in the Middle East, posing risks to oil infrastructure and shipping, and therefore to production and exports, as well as overlapping OPEC+ production cuts of 5.8 million bpd, have put a floor under oil prices.

However, high production in non-OPEC+ producers in the Americas, such as the United States, Canada and Brazil, as well as weak oil demand in some parts of the world, high global interest rates, and quota breaches by countries such as Iraq, Kazakhstan and the UAE have put downward pressure on oil prices, exacerbating compliance tensions within OPEC. OPEC said in a feature article that global refinery output also fell by 1.4 million bpd in September from the previous month due to maintenance and hurricane activity.

According to the October report, non-OPEC+ crude oil supply will increase by 1.23 million bpd in 2024 and 1.11 million bpd in 2025, the latter only 10,000 bpd higher than the September estimate.

Platts, part of S&P Global Commodity Insight, last assessed Brent crude futures at $80.15/bbl on Oct. 11, having recovered somewhat since nearly falling below $70/bbl on Sept. 10. However, the benchmark remains well below the 2024 peak of $93.35/bbl in mid-April and the fiscal break-even price for many OPEC+ members.

Weak oil prices led the alliance’s eight voluntary producers – Saudi Arabia, Kuwait, Algeria, Oman, Kazakhstan, Iraq, Russia and the United Arab Emirates – to postpone by two months a planned gradual reduction of 2.2 million bpd in October.

The group now plans to start increasing output by about 180,000 bpd in December, depending on market conditions.

Finally, the OPEC report estimated that OECD crude inventories fell by 6.5 million barrels from July to August, leaving them 128.1 million barrels below the 2015-19 average of 1.319 billion barrels.

OPEC+ sources complained that if the group’s members had fully complied with their quotas so far, global oil inventories would be lower, the market would be tighter and prices would be firmer, which would put additional pressure on overproducers.

The group will hold an in-person ministerial meeting in Vienna on December 1.

The above information is provided by special analysts and is for reference only. CM Trade does not guarantee the accuracy, timeliness and completeness of the information content, so you should not place too much reliance on the information provided. CM Trade is not a company that provides financial advice, and only provides services of the nature of execution of orders. Readers are advised to seek relevant investment advice on their own. Please see our full disclaimer.

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OPEC cuts oil demand growth forecast for third month in a row

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