OPEC Cuts Oil Demand Growth Forecast for 2024

By Alex Lawler

LONDON (Reuters) – OPEC on Tuesday cut its forecast for global oil demand growth in 2024, reflecting data received so far this year, and also trimmed its expectation for next year, marking the producer group's second consecutive downward revision.

The weaker outlook underscores the challenge faced by OPEC+, which includes the Organization of the Petroleum Exporting Countries and allies such as Russia, in balancing the market. Last week, OPEC+ delayed a plan to increase oil production after prices hit their lowest in 2024.

In a monthly report, OPEC stated that world oil demand will rise by 2.03 million barrels per day (bpd) in 2024, revised down from 2.11 million bpd expected last month. This forecast remained unchanged since it was first made in July 2023.

China accounted for much of the downgrade, with OPEC reducing its forecast of Chinese growth to 650,000 bpd in 2024 from 700,000 bpd. Oil use in China faces challenges from economic issues and a shift to cleaner fuels.

"Looking ahead, China's economic growth is expected to remain well supported," OPEC reported. "However, challenges in the real estate sector and the rise of LNG trucks and electric vehicles are expected to weigh on diesel and gasoline demand moving forward."

Following the report's release, oil prices dipped, with Brent crude trading below $71 a barrel, close to the lowest price since March 2023.

There is significant variation in 2024 demand growth forecasts due to differing views on China and the pace of transitioning to cleaner fuels. OPEC remains optimistic, sitting at the top of industry estimates, but has a long way to match the International Energy Agency's much lower perspective.

OPEC noted that this year's demand growth is still above the historical average of 1.4 million bpd seen before the COVID-19 pandemic in 2019.

The group increased its 2024 economic growth forecast to 3% from 2.9%, while keeping its 2025 outlook steady at 2.9%, indicating potential for upward revisions.

For the following year, OPEC reduced its 2025 global oil demand growth estimate to 1.74 million bpd from 1.78 million bpd, still at the high end of industry expectations.

OUTPUT FALLS

OPEC+ has enacted a series of output cuts since late 2022 to stabilize the market, most of which remain in effect until the end of 2025. The recent cuts of 2.2 million bpd were scheduled to begin unwinding in October but were postponed for two months due to slumping oil prices.

The report highlighted that actual production fell in August mainly due to unrest in Libya that disrupted output, with OPEC+ producing 40.66 million bpd in August, a decline of 304,000 bpd from July.

The OPEC report projected demand for OPEC+ crude at 43.8 million bpd in the fourth quarter, theoretically allowing for higher group production. Other forecasts are less optimistic for OPEC oil, with the IEA anticipating significantly lower demand growth of 970,000 bpd in 2024. The IEA is expected to revise its figures on Thursday.