The Organization of the Petroleum Exporting Countries (OPEC) projects an increase in global oil demand of 2.25 million barrels per day (bpd) in 2024 and 1.85 million bpd in 2025.
These figures remain unchanged from the previous month.
In addition, it has maintained its forecast for strong growth in global oil demand in 2024, despite lower-than-expected use in the first quarter.
Key Highlights:
Steady Demand Growth:
Despite a slight revision for the first quarter, OPEC expects oil demand to rise by 2.3 million bpd in the second half of 2024.
Travel and tourism are anticipated to drive this increase, as they contribute significantly to economic growth and, consequently, oil consumption.
Economic Stability:
OPEC's report highlights stable global economic growth in the first half of 2024.
The services sector, particularly travel and tourism, is expected to be a primary contributor to this growth in the latter half of the year.
Production Adjustments:
OPEC+ (OPEC and its allies, including Russia) has implemented several production cuts since late 2022 to support market stability.
The latest 2.2 million bpd production cut has been extended until the end of September 2024, with a phased reduction starting in October.
Market Reactions:
Following the OPEC report, oil prices remained stable, with Brent crude falling to $81 per barrel.
Goldman Sachs predicts that strong transportation demand will push the oil market into a deficit of 1.3 million bpd in the third quarter.
Diverging Forecasts:
There is a notable split among forecasters regarding oil demand growth in 2024, influenced by varying perspectives on the pace of the global transition to cleaner fuels.
While OPEC maintains a higher forecast, the International Energy Agency (IEA) anticipates much lower demand growth at 1.1 million bpd.
Production and Supply: OPEC+ is projected to need 43.6 million bpd of crude in the third quarter to meet demand, significantly more than the current production levels.
The group produced 40.92 million bpd in May, with reductions in Russia and Kazakhstan offset by increases in Nigeria and other smaller producers, with information to Reuters.
Implications for the Oil Industry in OPEC cuts and forecasts
Industry Adaptation: Workers and companies in the oil industry should prepare for potential fluctuations in demand and production adjustments, especially with OPEC+'s ongoing efforts to balance the market.
Economic Indicators: Monitoring travel and tourism trends can provide insights into future oil demand.
Market Dynamics: Staying informed about forecast discrepancies between major organizations like OPEC and the IEA can help anticipate market movements and strategic decisions.
Production Planning: Understanding OPEC+'s production strategies and cuts will be crucial for midstream and downstream planning, particularly in managing supply chains and pricing strategies.
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