The Organization of the Petroleum Exporting Countries (OPEC) has reaffirmed its predictions for global oil demand in 2024 and 2025, while revising its global economic growth forecast upwards. In its latest monthly report, OPEC anticipates oil demand to rise by 2.25 million barrels per day (bpd) in 2024 and 1.85 million bpd in 2025. These figures remain unchanged from the organization's previous assessments.
OPEC's bullish outlook on oil demand stems from its belief in a robust economic recovery. The report highlights a "robust dynamic" for economic growth observed in the latter half of 2023, which OPEC expects to extend into the first half of 2024. Consequently, the organization has nudged up its global economic growth projection for 2024 by 0.1 percentage points to 2.8%, citing strong performances in the United States, India, and to a lesser extent, Brazil. While the Eurozone and Japan experienced economic decline in late 2023, OPEC expresses cautious optimism for a rebound in these regions during the first quarter of 2024.
This positive economic outlook stands in contrast to forecasts from some other industry analysts. The International Energy Agency (IEA), for instance, predicts a peak in oil demand by 2030 as the world transitions towards cleaner energy sources. OPEC, however, maintains a more long-term view on oil's role in the global energy mix, suggesting that oil consumption will continue to rise for the next two decades.
The report also acknowledges potential factors that could dampen oil demand growth. OPEC recognizes the ongoing efforts to mitigate climate change and the potential impact of stricter environmental policies. Additionally, the report acknowledges the possibility of a slowdown in China's economic recovery, which could affect global oil consumption. Despite these considerations, OPEC believes that the combined forces of economic expansion, particularly in emerging economies, and easing inflation rates in 2024 and 2025 will continue to drive oil demand.
OPEC's continued confidence in oil's future comes at a time when the organization and its allies, collectively known as OPEC+, are managing oil production levels to influence global prices. The group has implemented production cuts in recent months to address supply concerns stemming from geopolitical tensions and potential shortfalls from Russia. The latest report suggests that OPEC may be comfortable maintaining its current production strategy given its optimistic outlook on oil demand.
While some analysts remain skeptical about OPEC's long-term oil demand projections, the organization's bullish stance on the immediate future underscores its belief in oil's continued relevance in the global energy landscape. The coming months will be crucial in determining the accuracy of OPEC's forecasts as the global economy navigates ongoing geopolitical and economic uncertainties.