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The Organization of the Petroleum Exporting Countries (OPEC) has slightly lowered its forecast for global oil-demand growth for 2024. This adjustment reflects softening expectations for China, the world’s largest crude oil importer, amid broader concerns about the country's economic outlook. The revision comes as oil prices recently recorded their first weekly gain since early July, supported by geopolitical tensions and improving economic data from the U.S.
Revised Forecasts
OPEC now expects global oil demand to grow by 2.11 million barrels per day (bpd) this year, down from its previous estimate of 2.25 million bpd. The updated forecast brings the total expected demand to 104.3 million bpd, incorporating actual data from the first and second quarters of the year. Despite the downward revision, demand remains robust, well above the pre-pandemic average of 1.4 million bpd, driven by strong air travel, road mobility, and industrial activities in non-OECD countries.
For 2024, OPEC also slightly cut its oil-demand growth forecast, now expecting an increase of 1.78 million bpd, down from the earlier estimate of 1.85 million bpd. The adjustments highlight the cautious optimism surrounding global economic recovery, tempered by uncertainties in key markets like China.
Market Dynamics and Price Influences
The oil market has been experiencing fluctuations, with prices recently staging a recovery. Brent crude, the international benchmark, is trading around $80 per barrel, while the U.S. gauge, West Texas Intermediate, is hovering around $77 per barrel. These prices are supported by fears of escalating conflict in the Middle East, particularly concerns over Iran’s potential retaliatory actions against Israel and the ongoing Russia-Ukraine war, which threatens energy supplies to Europe.
Additionally, the shutdown of Libya’s largest oil field and stronger-than-expected economic data from the U.S. have also contributed to the recent price gains, easing fears of an impending recession. However, persistent concerns over China’s slowing economy and uncertainties surrounding the timing of U.S. interest rate cuts continue to exert downward pressure on prices.
OPEC+ Production Strategy
The current price levels are notably below what Saudi Arabia and Russia, the leading members of the OPEC+ alliance, need to balance their budgets. This has led to speculation about whether the group will stick to its plan to gradually increase oil output starting in October. OPEC+ had previously agreed to extend production cuts into next year, with voluntary reductions of 2.2 million bpd set to last until the end of September 2024.
In July, overall OPEC crude-oil production increased by 185,000 bpd to 26.75 million bpd, with Saudi Arabia's output rising by 97,000 bpd to 9.015 million bpd. Meanwhile, Libya’s production fell by 19,000 bpd to 1.175 million bpd. OPEC maintained its estimates for supply growth from non-OPEC+ countries, expecting an increase of 1.2 million bpd in 2024, driven by contributions from the U.S., Canada, and Brazil.
Economic Outlook
OPEC raised its economic growth forecast for the U.S. to 2.4% this year, up from 2.2% previously, while maintaining global growth projections at 2.9% for both 2024 and 2025. The cartel anticipates that OECD economies will experience a rebound in the second quarter, with sustained momentum through the year, while non-OECD economies are expected to maintain strong growth despite a gradual normalization from the robust levels seen earlier in the year.
Key central banks are expected to adopt more accommodative monetary policies by the second half of the year and into 2025, although uncertainties about the near-term path of core inflation remain.
