The Organization of the Petroleum Exporting Countries (OPEC) has once again lowered its global oil demand growth projections, marking the fifth consecutive monthly downgrade and the steepest reduction for 2024 so far. This comes in the wake of OPEC’s decision to extend supply cuts.
Key Highlights:
- 2024 Demand Forecast: OPEC cut its forecast for oil demand growth by 210,000 barrels per day, bringing it down to 1.6 million barrels per day. Since July, the cartel has reduced its outlook by 27%.
- 2023 Consumption: OPEC estimates global oil consumption to average 103.82 million barrels per day this year.
Market Dynamics:
- OPEC+ Production Cuts: The OPEC+ coalition, led by Saudi Arabia and Russia, has delayed the resumption of suspended oil production for the third time. Scheduled production hikes will now begin in April 2024 instead of January.
- Oil Prices: Brent crude prices have fallen by 17% since July, trading near $73 per barrel—a level insufficient for many OPEC members to meet government budgetary needs.
Reasons for the Revision:
OPEC’s revised forecasts reflect bearish data from the third quarter, including weaker-than-expected demand in the OECD Americas and OECD Asia Pacific regions.
OPEC vs. Other Projections:
- OPEC’s 2024 growth estimates are roughly double those of Morgan Stanley and Goldman Sachs, and significantly higher than those of the International Energy Agency (IEA) and Saudi Aramco.
- The disparity between OPEC’s forecasts and actual 2023 consumption data raises skepticism about the organization’s long-term outlook, which assumes continued growth in oil demand until mid-century—a view not widely shared within the industry.
Long-Term Implications:
OPEC+ has been withholding oil output since 2022 to prevent market oversupply and stabilize prices. Under its current plan, the coalition will gradually revive 2.2 million barrels per day of halted production between April 2024 and late 2026. However, the repeated downward revisions and misaligned forecasts cast doubt on the group’s ability to predict and adapt to shifting market trends.
The challenges of weakening demand, booming supply from rivals, and falling prices suggest a precarious path forward for OPEC’s efforts to balance the global oil market.
