OPEC sounds the alarm: Global oil market faces new decline
By Asif Aydinli
On August 12, 2024, the Organization of the Petroleum Exporting Countries (OPEC) released its monthly report, revising downward its forecasts for global oil demand growth for 2024 and 2025. This adjustment reflects changing economic conditions and updated data on the state of the oil market, highlighting the increasing uncertainty and complexity of predicting future trends in the global energy landscape.
For 2025, the organization expects oil demand to grow by 1.78 million barrels per day, totaling 106.11 million barrels per day. This forecast has also been reduced by 65,000 barrels per day compared to previous expectations. The main factors influencing these changes are revised data on the state of the oil market and updated forecasts for oil demand in China, one of the world's largest oil consumers.
The reduction in OPEC's forecasts is associated with uncertainty in the global economy, which significantly impacts oil demand. In particular, the slowdown in economic growth in key countries like China is causing analysts to revise their expectations. China, which has been the main driver of global oil demand for many years, is facing several economic challenges, including a real estate crisis and a transition to greener energy sources. These factors may negatively affect oil demand in the coming years.
Nevertheless, despite these challenges, OPEC forecasts that in 2024, oil demand will be supported by high demand for air travel and road mobility, including freight transportation. In particular, in the United States, the world's largest oil consumer, demand is expected to grow due to strong household consumption and favorable economic dynamics. The Federal Reserve (Fed) may consider easing monetary policy, which will also support oil consumption.
In the Organization for Economic Co-operation and Development (OECD) countries, OPEC forecasts that oil demand will grow by 160,000 barrels per day in 2024, reaching 45.81 million barrels per day . However, this is lower than the previous forecast, which predicted growth of 190,000 barrels per day. In 2025, demand in OECD countries is expected to increase by 110,000 barrels per day, reaching 45.92 million barrels per day.
The US, as the largest oil consumer among OECD countries, plays a key role in shaping global demand. In 2024, oil demand in the US is expected to grow by 170,000 barrels per day, reaching 20.53 million barrels per day. In 2025, growth will continue but at a slower pace—40,000 barrels per day, reaching 20.57 million barrels per day. This is due to strong household consumption and support from the Fed's monetary policy.
Interestingly, in European OECD countries, oil demand in 2024 is forecasted to decline by 30,000 barrels per day to 13.42 million barrels per day. However, in 2025, the situation will change, and demand will grow by 20,000 barrels per day to 13.44 million barrels per day . This is due to the ongoing transformation of the European economy and the shift towards greener energy sources, which puts pressure on the consumption of traditional hydrocarbons.
In non-OECD countries, OPEC estimates that oil demand will grow by 1.95 million barrels per day in 2024, reaching 58.51 million barrels per day. In 2025, further demand growth of 1.68 million barrels per day is expected, reaching 60.19 million barrels per day. The main drivers of this growth will be China and India, where oil consumption is forecasted to increase amid continued economic growth and rising industrial production.
Specifically, in China, oil demand is expected to increase by 700,000 barrels per day in 2024, reaching 17.06 million barrels per day. However, in 2025, growth rates will slow, and demand will increase by only 410,000 barrels per day to 17.47 million barrels per day. This is due to problems in the real estate sector and the growing popularity of alternative energy sources such as liquefied natural gas (LNG) and electric vehicles.
India, another major oil consumer in Asia, will continue to increase its oil consumption. In 2024, demand in India is expected to grow by 230,000 barrels per day, reaching 5.58 million barrels per day, and by the same amount in 2025, reaching 5.8 million barrels per day. Demand growth in India is supported by expanding industrial production and increasing demand for transportation fuel.
According to OPEC, commercial oil and oil product stocks in OECD countries stood at 2.831 billion barrels in June 2024, down by 14.1 million barrels compared to May 2024 and 116 million barrels below the average level for 2015-2019. The decline in oil stocks reflects OPEC+ countries' efforts to balance the global oil market by reducing production.
Regarding days forward coverage, OECD commercial stocks decreased by 0.1 days in June 2024 compared to May 2024, totaling 61.2 days.
This is 0.6 days less than the average for 2015-2019, indicating a gradual reduction of excess stocks in the market and improved balancing.
In 2024, liquid hydrocarbon production (LHC) in non-OPEC+ countries is forecasted at 53.00 million barrels per day, 1.23 million barrels per day higher than in 2023. The main drivers of supply growth will be the US, Canada, and Brazil. In 2025, LHC production is expected to grow by 1.1 million barrels per day, reaching 54.10 million barrels per day. The US, Brazil, Canada, and Norway will play a leading role in this growth, while production in Angola is forecasted to decline.
Particular attention is drawn to the situation with oil production in Russia, which reduced its output by 26,000 barrels per day in July 2024 to 9.089 million barrels per day, exceeding the planned levels agreed within OPEC+ by 111,000 barrels per day. In the first two quarters of 2024, Russia met its obligations to voluntarily cut oil production, but in the third quarter, it must comply with stricter restrictions.
Despite current challenges, OPEC+ continues to control the oil market by balancing supply and demand. Countries like Russia and Saudi Arabia voluntarily reduce oil production by millions of barrels per day to support prices and stabilize the market. These measures are expected to help maintain balance in the oil market and minimize the impact of unexpected economic shocks.
OPEC's downward revision of oil demand growth forecasts reflects the current global economic challenges and uncertainty. The global economy is facing many factors that complicate the prediction of future hydrocarbon consumption. In this situation, organizations engaged in oil production and export must adapt to new conditions, maintaining flexibility and readiness for changes.
Similar news
