OPEC Lowers 2024 Oil Demand Growth Forecast

By Alex Lawler

LONDON (Reuters) – OPEC on Monday cut its forecast for global oil demand growth in 2024, reflecting data received so far this year. This marks the producer group's third consecutive downward revision.

The weaker outlook highlights the dilemma faced by OPEC+, which includes the Organization of the Petroleum Exporting Countries and allies like Russia, planning to start raising output in December after previously delaying the hike in response to falling prices.

In its monthly report, OPEC stated that world oil demand is expected to rise by 1.93 million barrels per day (bpd) in 2024, down from the growth of 2.03 million bpd it anticipated last month. Until August, OPEC had kept this forecast unchanged since it was first made in July 2023.

China accounted for most of the downgrade in the 2024 forecasts, with OPEC trimming its Chinese growth forecast to 580,000 bpd from 650,000 bpd. Although government stimulus measures are expected to support fourth-quarter demand, oil usage faces challenges from economic conditions and the transition towards cleaner fuels, according to OPEC.

OPEC also pointed out that diesel consumption remained subdued due to slow economic activity, particularly a downturn in construction, and the increasing use of liquefied natural gas (LNG) instead of petroleum diesel in heavy-duty trucks.

Following the report, oil prices held a decline of about 2%, with Brent crude trading below $78 a barrel. A substantial divide exists among forecasters regarding the strength of demand growth in 2024, partly due to differing views on China's economy and the global shift to cleaner fuels. OPEC's outlook is notably more optimistic than the International Energy Agency's (IEA), which holds a considerably lower forecast.

OPEC noted that this year's demand growth continues to exceed the historical average of 1.4 million bpd observed before the COVID-19 pandemic, which caused a significant dip in oil consumption.

For next year, OPEC also revised its 2025 global demand growth estimate down to 1.64 million bpd from 1.74 million bpd.

LIBYA, IRAQ, RUSSIA CUTS

OPEC+ has been implementing a series of output cuts since late 2022 to stabilize the market, most of which remain in effect until the end of 2025. The group was set to begin unwinding the most recent round of cuts—totaling 2.2 million bpd—starting in October, but opted to delay the plan by two months due to falling oil prices.

The report indicated that production fell in September due to unrest in Libya and output reductions from Iraq. OPEC+ produced 40.1 million bpd, a drop of 557,000 bpd from August. Iraq's production decreased to 4.11 million bpd, down 155,000 bpd, but still above its 4 million bpd quota.

In addition to Iraq, OPEC identified Russia and Kazakhstan as OPEC+ countries that exceeded their production quotas. In September, Russia's output was down by 28,000 bpd to about 9 million bpd, according to data from secondary sources. Conversely, Kazakhstan increased its production by 75,000 bpd to 1.55 million bpd.

The OPEC report projects OPEC+ crude demand at 43.7 million bpd in Q4, theoretically leaving room for increased production. However, other projections suggest less capacity, as the IEA anticipates a much lower demand growth rate than OPEC's forecast, estimating it at just 900,000 bpd for 2024. The IEA is scheduled to update its figures on Tuesday.