OPEC Maintains Optimistic Oil Demand Outlook Amid Economic Growth

The Organization of the Petroleum Exporting Countries (OPEC) has reiterated its expectation for solid global oil demand growth in 2024 and 2025, simultaneously upgrading its economic growth projections for both years. This announcement comes amid a landscape where further economic improvement could significantly boost oil demand. OPEC’s forecast suggests a more robust demand growth compared to other industry forecasts, including those from the International Energy Agency (IEA), despite ongoing output reductions by the broader OPEC+ alliance aimed at market stabilization.

OPEC anticipates oil demand to surge by 2.25 million barrels per day (bpd) in 2024 and 1.85 million bpd in 2025, holding steady from its previous estimates. This outlook is underpinned by a “positive trend” in economic growth stretching into the first half of 2024, prompting OPEC to adjust its economic growth forecasts upwards by 0.1 percentage points for the mentioned years.

The organization’s optimism is bolstered by the anticipation of general inflation easing throughout this year and the next, contributing to an environment conducive to economic and oil demand growth. OPEC now projects world economic growth at 2.7% for 2024 and 2.9% for 2025.

Oil prices have found a level of support from various factors including geopolitical tensions in the Middle East and supply disruptions. However, concerns about persistently high interest rates have also influenced market sentiments. As of Tuesday, Brent crude was trading at approximately $82 a barrel, reflecting a modest increase.

OPEC’s demand growth outlook for this year significantly exceeds the IEA’s current forecast of an expansion of 1.24 million bpd, with the IEA expected to release updated forecasts soon. The differing views between OPEC and the IEA on long-term demand and the necessity for new supply investment have been a point of contention. While the IEA suggests a peak in oil demand by 2030 due to a transition towards cleaner energy, OPEC’s long-term outlook extending to 2045 sees no demand peak, asserting the robustness of its projections.

In support of market stability, OPEC and its OPEC+ counterparts have enacted several output cuts since late 2022, including a new reduction for the first quarter that commenced last month. According to the latest reports, OPEC oil production decreased by 350,000 bpd to 26.34 million bpd in January, following the implementation of these voluntary cuts.

This steadfast outlook from OPEC not only underscores the organization’s confidence in the resilience and growth of the global economy but also highlights the critical role of oil in driving future economic expansion.