Business a.m.
The Organization of the Petroleum Exporting Countries (OPEC), has revealed a gloomy outlook for the oil industry, slashing its forecast for global oil demand growth in 2024.
The adjustment, influenced by incoming data that paint a less-than-rosy picture of the oil market, marks the third consecutive downgrade for the producer group, whose cuts reflect a deepening concern about the future of the sector.
The intergovernmental organisation consisting 12 oil-exporting developing nations, in its monthly report, indicated that world oil demand will now rise by 1.93 million barrels per day (bpd) in 2024, down from the previous expectation of 2.03 million bpd, representing a decline of 0.1 million bpd from its previous forecast.
Differences of opinion on the future strength of global oil demand growth in 2024 have caused a wide split between forecasters. A major factor in the split is the divergence in forecasts of oil demand from China and the rate of the global transition to cleaner fuels. Despite downward revisions to its own forecasts, OPEC remains at the upper end of the range of oil demand forecasts from the industry, indicating that it remains more optimistic than many others.
China’s economic outlook and policy decisions were the primary drivers of the downward revision in the 2024 global oil demand forecast released by OPEC. The organization downgraded its China oil demand growth forecast by 70,000 bpd, reducing its earlier estimate of 650,000 bpd to 580,000 bpd.
OPEC noted that while Chinese government stimulus measures may boost fourth-quarter demand, economic challenges and the increasing adoption of cleaner fuels in China may act as barriers to higher oil consumption.
In reference to the month of August, OPEC observed that diesel consumption was lacklustre due to a slowdown in economic activity, specifically in the building and housing construction sectors. Additionally, the substitution of liquefied natural gas (LNG) for petroleum diesel fuel in heavy-duty trucks contributed to the overall slump in diesel consumption.
Based on this trend and other factors, OPEC reduced its global oil demand growth forecast for 2025 to 1.64 million barrels per day (bpd) from the earlier estimate of 1.74 million bpd, signalling a weakening in the outlook for oil demand.
