OPEC reduced its forecast for global oil demand growth in 2024 on Monday, citing softer expectations for China. This marks the first revision of OPEC’s 2024 forecast since it was initially set in July 2023. The adjustment highlights the challenges faced by the broader OPEC+ group as it considers increasing production from October.
OPEC’s latest monthly report indicates that global oil demand is expected to rise by 2.11 million barrels per day (bpd) in 2024, a decrease from the 2.25 million bpd projected last month. This revision follows signs that demand in China has not met expectations, particularly due to a slump in diesel consumption and the ongoing crisis in the property sector, which has weighed heavily on the economy.
The report also notes a wide range of forecasts for 2024 oil demand growth, reflecting differing views on China’s economic trajectory and the global transition to cleaner fuels. OPEC’s forecast remains among the highest in the industry, with a significant gap compared to the far more conservative estimate from the International Energy Agency (IEA).
OPEC explained, “This slight revision reflects actual data received for the first quarter of 2024 and, in some cases, for the second quarter, as well as softening expectations for China’s oil demand growth in 2024.”
Despite the downward revision, OPEC emphasized that this year’s demand growth is still above the historical average of 1.4 million bpd, observed before the COVID-19 pandemic in 2019, and noted that summer travel demand is expected to remain strong.
“Despite a slower start to the summer driving season compared to last year, transport fuel demand is projected to stay robust due to healthy road and air mobility,” the report stated.
OPEC also lowered its demand growth estimate for next year to 1.78 million bpd from the previous 1.85 million bpd, still at the higher end of industry expectations.
Last week, oil prices touched their lowest point this year, near US$75 per barrel, amid concerns about Chinese demand and the possibility of a U.S. recession. Following the release of OPEC’s report, prices stabilized above US$80 per barrel.
July Production Increase
OPEC+, which includes OPEC and allies like Russia, has implemented a series of output cuts since late 2022 to support the market, most of which are set to remain in place until the end of 2025.
On August 1, OPEC+ confirmed plans to begin unwinding the most recent cuts of 2.2 million bpd starting in October, with the option to pause or reverse the decision if necessary. The group has until September to decide whether to proceed with releasing additional oil in October, and will review market data in the coming weeks, according to a source close to OPEC+.
OPEC’s report indicated that actual production is on the rise, with OPEC+ pumping 40.9 million bpd in July, an increase of 117,000 bpd from June, driven primarily by higher output from Saudi Arabia.
The report projects demand for OPEC+ crude at 43.8 million bpd in the fourth quarter, theoretically allowing room for increased production by the group. However, other forecasts suggest less flexibility. The IEA, representing industrialized countries, anticipates much lower demand growth of 970,000 bpd in 2024. The IEA is expected to update its figures on Tuesday.
