OPEC Slightly Trims Oil Demand Forecast, Citing Softness in China© dado ruvic/Reuters
The Organization of the Petroleum Exporting Countries slightly lowered its forecast for oil-demand growth, citing softening expectations for China at a time when market concerns over the top crude importer’s outlook have been weighing on prices.
The Vienna-based cartel now forecasts demand to grow by 2.11 million barrels a day this year-reaching a total of 104.3 million barrels a day on average-from 2.25 million barrels a day previously. The revision also reflects actual data for the first and second quarter.
Oil-demand estimates for next year were also slightly cut, with growth now forecast at 1.78 million barrels a day from previous estimates of 1.85 million barrels a day.
Monday’s report came as oil prices recorded their first weekly gain since early July last week, after staging a recovery from a broader selloff in financial markets. Brent crude, the international oil benchmark, trades around $80 a barrel, while the U.S. oil gauge West Texas Intermediate is around $77 a barrel.
Both benchmarks are supported by fears of a full-scale war in the Middle East, with markets bracing for Iran’s retaliatory strike against Israel in response to the killing of Hamas’s political leader. Sentiment is also buoyed by intense fighting between Russia and Ukraine threatening energy supplies to Europe, the shutdown of Libya’s largest oil field, and more encouraging economic data easing fears of a recession in the U.S.
Related video: OPEC+ must maintain supply discipline and keep voluntary cuts in place: Economist (CNBC)
Still, prices continue to be under pressure due to persistent concerns over a slowing Chinese economy crimping demand and uncertainties around the timing of interest-rate cuts in the U.S., as traders await more insights on the path of inflation to further substantiate expectations of a September cut.
Current prices also seem far from what the two main leaders of the OPEC+ alliance—Saudi Arabia and Russia—need to balance their budgets, according to market watchers, with some analysts now wondering whether the group will delay or stick to its plan to gradually put more oil into the market starting from October.
The group of oil producing countries in June agreed to extend all production curbs into next year. It decided to roll over voluntary cuts of 2.2 million barrels a day until the end of September, but said it aims to gradually phase them out from October 2024 to September 2025.
An OPEC+ ministerial committee that gathered earlier this month made no recommendations for the group to change its output policy and didn’t provide any hints on whether a gradual phase-out of voluntary output cuts could start in October.
Meanwhile, overall OPEC crude-oil production rose by 185,000 barrels a day to 26.75 million barrels a day in July, the cartel said, citing secondary sources. Oil production from Saudi Arabia rose by 97,000 barrels a day to 9.015 million barrels a day, while Libya’s production fell by 19,000 barrels a day to 1.175 million barrels a day.
OPEC left its estimates for supply growth from countries not participating in the Declaration of Cooperation—the formal name for OPEC+—at 1.2 million barrels a day for 2024, saying the main drivers of growth are expected to be the U.S., Canada and Brazil. Growth estimates for 2025 were also maintained at 1.1 million barrels a day.
The group raised its estimates for economic growth in the U.S. to 2.4% this year from 2.2% previously. Estimates for global economic growth were maintained at 2.9% for this year and next, with growth in the eurozone still projected at 0.7% and 1.2%, respectively.
OPEC said it expects growth in OECD economies to rebound in the second quarter and keep the momentum through the end of the year, while growth in non-OECD economies should remain strong throughout the year despite a gradual normalization from robust levels seen in the first quarter.
Key central banks are expected to adopt more accommodative monetary policies by the second half of the year and throughout 2025, even though uncertainties regarding the near-term trajectory of core inflation linger.
“The recent increase in volatility in global equity markets at the beginning of August may also prompt central banks to consider counterbalancing measures, reinforcing the case for lowering key policy rates in the coming months,” the cartel said.
The International Energy Agency is due to release its oil-monthly report on Tuesday. The Paris-based agency’s current projections are substantially lower than OPEC’s, with oil-demand growth estimated at 970,000 barrels a day for this year and 980,000 barrels a day for next year.
OPEC Slightly Trims Oil Demand Forecast, Citing Softness in China© dado ruvic/Reuters
The Organization of the Petroleum Exporting Countries slightly lowered its forecast for oil-demand growth, citing softening expectations for China at a time when market concerns over the top crude importer’s outlook have been weighing on prices.
The Vienna-based cartel now forecasts demand to grow by 2.11 million barrels a day this year-reaching a total of 104.3 million barrels a day on average-from 2.25 million barrels a day previously. The revision also reflects actual data for the first and second quarter.
Oil-demand estimates for next year were also slightly cut, with growth now forecast at 1.78 million barrels a day from previous estimates of 1.85 million barrels a day.
Monday’s report came as oil prices recorded their first weekly gain since early July last week, after staging a recovery from a broader selloff in financial markets. Brent crude, the international oil benchmark, trades around $80 a barrel, while the U.S. oil gauge West Texas Intermediate is around $77 a barrel.
Both benchmarks are supported by fears of a full-scale war in the Middle East, with markets bracing for Iran’s retaliatory strike against Israel in response to the killing of Hamas’s political leader. Sentiment is also buoyed by intense fighting between Russia and Ukraine threatening energy supplies to Europe, the shutdown of Libya’s largest oil field, and more encouraging economic data easing fears of a recession in the U.S.
Related video: OPEC+ must maintain supply discipline and keep voluntary cuts in place: Economist (CNBC)
Still, prices continue to be under pressure due to persistent concerns over a slowing Chinese economy crimping demand and uncertainties around the timing of interest-rate cuts in the U.S., as traders await more insights on the path of inflation to further substantiate expectations of a September cut.
Current prices also seem far from what the two main leaders of the OPEC+ alliance—Saudi Arabia and Russia—need to balance their budgets, according to market watchers, with some analysts now wondering whether the group will delay or stick to its plan to gradually put more oil into the market starting from October.
The group of oil producing countries in June agreed to extend all production curbs into next year. It decided to roll over voluntary cuts of 2.2 million barrels a day until the end of September, but said it aims to gradually phase them out from October 2024 to September 2025.
An OPEC+ ministerial committee that gathered earlier this month made no recommendations for the group to change its output policy and didn’t provide any hints on whether a gradual phase-out of voluntary output cuts could start in October.
Meanwhile, overall OPEC crude-oil production rose by 185,000 barrels a day to 26.75 million barrels a day in July, the cartel said, citing secondary sources. Oil production from Saudi Arabia rose by 97,000 barrels a day to 9.015 million barrels a day, while Libya’s production fell by 19,000 barrels a day to 1.175 million barrels a day.
OPEC left its estimates for supply growth from countries not participating in the Declaration of Cooperation—the formal name for OPEC+—at 1.2 million barrels a day for 2024, saying the main drivers of growth are expected to be the U.S., Canada and Brazil. Growth estimates for 2025 were also maintained at 1.1 million barrels a day.
The group raised its estimates for economic growth in the U.S. to 2.4% this year from 2.2% previously. Estimates for global economic growth were maintained at 2.9% for this year and next, with growth in the eurozone still projected at 0.7% and 1.2%, respectively.
OPEC said it expects growth in OECD economies to rebound in the second quarter and keep the momentum through the end of the year, while growth in non-OECD economies should remain strong throughout the year despite a gradual normalization from robust levels seen in the first quarter.
Key central banks are expected to adopt more accommodative monetary policies by the second half of the year and throughout 2025, even though uncertainties regarding the near-term trajectory of core inflation linger.
“The recent increase in volatility in global equity markets at the beginning of August may also prompt central banks to consider counterbalancing measures, reinforcing the case for lowering key policy rates in the coming months,” the cartel said.
The International Energy Agency is due to release its oil-monthly report on Tuesday. The Paris-based agency’s current projections are substantially lower than OPEC’s, with oil-demand growth estimated at 970,000 barrels a day for this year and 980,000 barrels a day for next year.