OPEC Cuts Oil Demand Forecast for 2024

By Alex Lawler
LONDON (Reuters) – OPEC on Tuesday cut its forecast for global oil demand growth in 2024, reflecting data this year, marking the group’s second consecutive downward revision.

The weaker outlook further underscores the challenge faced by OPEC+, which includes OPEC 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, down from the previously expected growth of 2.11 million bpd. This forecast remained unchanged until last month, when it was first made in July 2023.

China was primarily responsible for the latest downgrade, with OPEC lowering its forecast of Chinese growth from 700,000 bpd to 650,000 bpd in 2024. This is attributed to economic challenges and a shift towards cleaner fuels.

“Looking ahead, China’s economic growth is expected to remain well supported,” OPEC stated in its report.

“However, headwinds in the real estate sector and the increasing penetration of LNG trucks and electric vehicles are likely to weigh on diesel and gasoline demand going forward.”

Oil prices fell slightly after the report, with Brent crude trading below $71 a barrel, near the lowest price since March 2023.

There is significant divergence in 2024 demand growth forecasts, particularly regarding China and the transition to cleaner fuels. OPEC’s expectations remain at the high end compared to the International Energy Agency (IEA), which maintains a much lower outlook.

OPEC noted that this year’s demand growth still exceeds the historical average of 1.4 million bpd seen prior to the COVID-19 pandemic.

The group expressed optimism on the economic front, raising its 2024 economic growth forecast to 3% from 2.9%. OPEC kept its 2025 view unchanged at 2.9%, suggesting potential for future upward revisions.

For 2025, OPEC cut its global oil demand growth estimate to 1.74 million bpd from 1.78 million bpd, remaining at the top end of industry expectations.

Output Cuts Continue

OPEC+ has enacted several output cuts since late 2022 to stabilize the market, most of which remain in effect until the end of 2025. The group had planned to start unwinding recent cuts of 2.2 million bpd from October but postponed this decision by two months due to falling prices.

OPEC’s report indicated that actual production fell in August, primarily due to unrest in Libya, which disrupted output. OPEC+ reported pumping 40.66 million bpd in August, down 304,000 bpd from July, largely due to Libya’s decline.

The report anticipates demand for OPEC+ crude at 43.8 million bpd in the fourth quarter, theoretically allowing for increased production.

In contrast, the IEA forecasts a considerably lower demand growth of 970,000 bpd for 2024 and is set to update its figures on Thursday.