The Organisation of the Petroleum Exporting Countries (OPEC) has reduced its projection for global oil demand growth in 2024, influenced by more subdued expectations for China. This move underscores the challenge faced by the broader OPEC+ alliance in increasing production from October. Following OPEC's initial revision of its 2024 forecast since July 2023, oil prices experienced a decline on Tuesday, breaking a five-day streak of gains. Global benchmark Brent crude futures dropped by 78 cents, or 0.95%, to $81.52 a barrel at 03:30 GMT, while US West Texas Intermediate crude futures fell to $79.33 a barrel, a decrease of 73 cents, or 0.91%.
In contrast, the International Energy Agency (IEA), representing industrialized nations, anticipates a significantly lower demand growth for oil in 2024, estimating it at 970,000 barrels per day. On Tuesday, the IEA upheld its global oil demand growth forecast for 2024 but adjusted its 2025 estimate downward, attributing the change to reduced consumption in China. The IEA suggests that the conclusion of China's post-Covid economic recovery is curtailing global oil demand, although advanced economies, notably the US, are mitigating this effect due to high gasoline consumption.
The latest market assessment by OPEC indicates increasing worries about China's demand, which is weaker than anticipated due to falling diesel consumption and economic difficulties in its property sector. Market strategist Yeap Jun Rong at IG highlighted the ongoing concerns regarding crude oil demand, particularly in light of upcoming US inflation data. Yeap noted that any indication of heightened economic risks could exert pressure on oil prices, especially given OPEC+'s reduced 2024 demand forecast and their intention to relax production cuts starting in October.
In its monthly report, OPEC forecasted that global oil demand would rise by 2.11 million barrels per day in 2024, a decrease from the previously expected 2.25 million barrels per day. Market analysts observe a wide divergence in 2024 demand growth forecasts, largely due to differing views on China and the global shift towards cleaner fuels. OPEC's estimates remain at the higher end of the industry spectrum and are significantly above the International Energy Agency's much lower projections.
OPEC's revision reflects updated data for the first and second quarters of 2024, as well as softer expectations for China's oil demand growth. Despite this, the current year's demand growth remains above the historical average of 1.4 million barrels per day seen before the Covid-19 pandemic. OPEC anticipates a robust peak in demand this year, driven by strong summer travel.
OPEC also adjusted its demand growth estimate for next year downward to 1.78 million barrels per day from 1.85 million barrels per day, still at the higher end of industry expectations. Oil prices recently hit their lowest point this year near $75 per barrel, influenced by concerns over Chinese demand and a potential US recession. Prices stabilized following the release of OPEC's report, trading above $80.
OPEC+, which includes OPEC and allied nations like Russia, has implemented several output reductions since late 2022 to stabilize the market, with most measures in effect until the end of 2025. On August 1, the alliance confirmed plans to begin unwinding the latest round of cuts, totaling 2.2 million barrels per day, from October, with the option to pause or reverse the action if necessary.
The group has until the end of August to decide on the commencement of oil releases in October and will review oil market data in the coming weeks. Production has been increasing, with OPEC+ pumping 40.9 million barrels per day in July, a rise of 117,000 barrels per day from June, led by Saudi Arabia. The report forecasts demand for OPEC+ crude at 43.8 million barrels per day in the fourth quarter, theoretically providing space for increased production by the group.
