The Organization of the Petroleum Exporting Countries (OPEC) has revised its projection for oil demand growth in 2023, anticipating a slight deceleration in 2024 due to prevailing economic headwinds.
Nonetheless, the robust expansion in fuel consumption driven by China and India is expected to persist, the global oil cartel stated in its report on Thursday.
In its monthly report, OPEC stated that it foresees global oil demand to surge by 2.25 million barrels per day (bpd) in 2024, representing a growth rate of 2.2 percent. This estimate is slightly lower than the projected increase of 2.44 million bpd anticipated for 2023.
Notably, OPEC’s forecast for demand growth in 2024 is twice that of the International Energy Agency (IEA), a closely observed forecaster which updated its outlook earlier on the same day. Following the release of OPEC’s report, oil prices experienced an upward trajectory.
Oil demand growth serves as a barometer for gauging the strength of the oil market and plays a significant role in shaping policy decisions by OPEC and its allies, collectively known as OPEC+. This consortium extended supply curbs into 2024 to provide support to the market.
According to OPEC’s report, the pre-emptive measures and production cuts implemented by OPEC+ have contributed to market stability. Consequently, the organization expects the robust fundamentals observed in the oil market this year to persist throughout 2024.
OPEC stated, “In 2024, solid global economic growth amid continued improvements in China is expected to boost consumption of oil.”
Additionally, OPEC raised its demand growth projection for 2023 by 90,000 bpd compared to the previous month. Last week, OPEC sources indicated that the organization would maintain an optimistic outlook for demand in 2024, anticipating higher growth compared to the IEA’s forecast.
In its report, OPEC predicted global economic growth of 2.5% in 2024, slightly lower than the 2.6% projected for 2023. This assumption factors in the easing of “general inflation” in the latter half of 2023 and in 2024. Furthermore, the organization assumes that key interest rates will peak by the end of 2023.
OPEC’s outlook for 2024 indicates that oil demand will outpace supply growth from non-OPEC producers. The organization expects non-OPEC supply to rise by 1.4 million bpd, trailing demand growth and maintaining the same pace as in 2023.
Consequently, OPEC forecasts that the global market will require 30.2 million bpd from its member countries to achieve equilibrium in 2024, representing an increase of 800,000 bpd from 2023.
Currently, OPEC’s production levels remain considerably lower. The report revealed that OPEC’s output rose by 91,000 bpd to reach 28.19 million bpd in June, primarily driven by increases in production from Iran and Iraq. It is worth noting that Iran is exempt from output cuts as one of OPEC’s member countries.
Looking ahead, the United States is expected to contribute the most significant share to the expansion of non-OPEC supply next year. However, OPEC anticipates a slowdown in the growth of U.S. tight oil, also known as shale, to 500,000 bpd in 2024, compared to 730,000 bpd in 2023.