OPEC Cuts Global Oil Demand Growth Forecast for 2024

By Alex Lawler
LONDON (Reuters) – On Monday, OPEC adjusted its global oil demand growth forecast for 2024 downward, reflecting weaker expectations for China and complicating the decision for the OPEC+ group regarding production increases starting in October.

This marks OPEC’s first revision to the 2024 forecast since its initial announcement in July 2023, amid clear indicators that China’s demand has fallen short of expectations due to decreasing diesel consumption and an ongoing property sector crisis affecting its economy.

In its monthly report, OPEC estimated that worldwide oil demand will increase by 2.11 million barrels per day (bpd) in 2024, revised down from a previous expectation of 2.25 million bpd.

The differences in growth forecasts for 2024 stem from varying outlooks on China’s demand and the global shift towards cleaner energy. OPEC continues to provide the most optimistic industry estimates, but still trails the International Energy Agency (IEA), which presents a significantly lower forecast.

OPEC indicated that the minor adjustment reflects actual data received for early 2024, as well as diminishing expectations for China’s oil demand growth in the same year.

Despite these revisions, OPEC noted that 2023’s demand growth remains above the historical average of 1.4 million bpd prior to the COVID-19 pandemic, which caused a decline in oil consumption. The organization expects strong transportation fuel demand bolstered by summer travel despite a sluggish start to the season compared to last year.

Additionally, OPEC revised next year’s demand growth estimate to 1.78 million bpd, down from 1.85 million bpd but still optimistic relative to broader industry projections.

Oil prices recently dipped to their lowest for the year near $75 per barrel, driven by concerns over demand from China and potential U.S. recession impacts. Following the report’s release, prices held steady, trading above $80.

July Production Insights

OPEC+—which includes OPEC and allied nations like Russia—has initiated various output cuts since late 2022 to stabilize the market, with these cuts scheduled to last until the end of 2025.

On Aug. 1, OPEC+ reaffirmed its intent to begin unwinding the latest cuts of 2.2 million bpd in October, with considerations for pausing or reversing this decision if necessary. The group has until next month to deliberate on the initiation of these production increases, closely monitoring oil market data in the intervening weeks.

The report indicated a rise in actual oil production, with OPEC+ pumping 40.9 million bpd in July—an increase of 117,000 bpd from June, largely driven by Saudi Arabia’s output.

OPEC projected a demand of 43.8 million bpd for OPEC+ crude in the fourth quarter, theoretically allowing for increased production by the group. Yet, alternative forecasts, particularly from the IEA, suggest a more modest demand growth estimate of only 970,000 bpd in 2024. The IEA is anticipated to update its forecast on Tuesday.