By Alex Lawler
LONDON (Reuters) – OPEC on Tuesday cut its forecast for global oil demand growth in 2024 based on data it has received so far this year. OPEC also cut its forecast for next year, marking the producer group’s second consecutive downgrade.
The weaker outlook further underlines the challenge OPEC+, which consists of the Organization of the Petroleum Exporting Countries and allies such as Russia, faces in balancing the market. Last week, OPEC+ postponed a plan to pump more oil after prices hit record lows in 2024.
On Tuesday, OPEC said in a monthly report that global oil demand will rise by 2.03 million barrels per day (bpd) in 2024, up from 2.11 million barrels per day of growth expected last month. Until last month, OPEC had left the forecast unchanged since it was first made in July 2023.
China was responsible for most of the latest credit downgrade, as OPEC cut its forecast for Chinese growth in 2024 from 700,000 barrels per day to 650,000 barrels per day. Oil use in the world’s second-largest economy faced headwinds due to economic challenges and the shift to cleaner fuels, OPEC said.
“Looking ahead, China’s economic growth is expected to remain well supported,” OPEC said in the report.
“However, headwinds in the real estate sector and increasing penetration of LNG trucks and electric vehicles are likely to dampen demand for diesel and gasoline in the future.”
Oil traded lower after the report’s release, trading below $71 a barrel, close to its lowest price since March 2023.
There is a wide divide in demand growth forecasts for 2024 due to differences of opinion against China and the pace of the global transition to cleaner fuels. OPEC still tops industry estimates and has a long way to go to match the International Energy Agency’s much lower vision.
OPEC said demand growth this year was still above the historical average of 1.4 million barrels per day before the 2019 COVID-19 pandemic, which caused a drop in oil consumption.
The group was optimistic on the economic front and increased its economic growth forecast for 2024 from 2.9% to 3%. OPEC left its 2025 view unchanged at 2.9% and said there was potential to revise the figure upwards for next year.
For next year, OPEC lowered its estimate of global oil demand in 2025 from 1.78 million barrels per day to 1.74 million barrels per day, also at the high end of what the industry expects.
EXPORTS FALL
OPEC+ has implemented a series of production cuts since late 2022 to support the market, most of which will last until the end of 2025.
The group was due to start phasing out its latest cuts of 2.2 million barrels per day from October, but decided last week to delay the plan for two months after oil prices fell.
The OPEC report shows that actual production fell in August, mainly due to the unrest in Libya that disrupted production. OPEC+ rose 40.66 million barrels per day in August, down 304,000 barrels per day from July, driven by a decline in Libya.
The OPEC report estimates demand for OPEC+ crude oil, or crude oil from OPEC plus its allied countries, at 43.8 million barrels per day in the fourth quarter, theoretically leaving room for higher production from the group.
Other forecasts give less room for OPEC oil. The IEA, which represents industrialized countries, projects much lower demand growth than OPEC of 970,000 barrels per day in 2024. The IEA will update its figures on Thursday.
