The Organization of the Petroleum Exporting Countries (OPEC) is forecasting a robust summer for oil demand, driven by increased travel and economic growth. This prediction comes amidst a wider-than-usual range of forecasts from various agencies regarding global oil demand growth in 2024.
Upbeat Outlook for 2024 Oil Demand
OPEC maintained its forecast for global oil demand to rise by 2.25 million barrels per day (bpd) in 2024, unchanged from last month’s report. This optimistic outlook is partly fueled by their belief that economic growth will continue to gain momentum throughout the year, potentially pushing oil prices even higher. The price of oil has already climbed above $90 a barrel in 2024 due to tighter supply and ongoing geopolitical tensions in the Middle East.
Looking ahead to the summer months, a time when fuel consumption typically increases due to seasonal travel, OPEC predicts a significant rise in demand for jet fuel, gasoline, and diesel. They estimate jet fuel demand to grow by 600,000 bpd year-on-year in the second quarter, with gasoline and diesel demand rising by 400,000 bpd and 200,000 bpd respectively.
OPEC+ Meeting in June to Decide Production Strategy
Following their recent decision to maintain oil production cuts until the end of June, the OPEC+ alliance, which includes major oil producers like Russia, will convene again in June to determine their production strategy for the latter half of 2024. This critical meeting will decide whether to extend the output cuts or return some supply to the market.
While OPEC paints a rosy picture for oil demand, their forecast is significantly higher than some other estimates. This discrepancy highlights the ongoing debate about the pace of the global transition to cleaner energy sources. For instance, the U.S. government’s energy forecaster recently lowered its oil demand growth prediction for 2024 to 950,000 bpd, considerably lower than OPEC’s estimate.
Despite these differing viewpoints, OPEC maintains its conviction that oil demand will continue to rise for the next two decades. This belief stands in stark contrast to agencies like the International Energy Agency (IEA), which predicts oil demand will peak by 2030. The IEA is scheduled to update its oil demand forecast later this week.
OPEC Crude Production Steady Despite Cuts
OPEC’s report also revealed that their oil production remained relatively stable in March, rising slightly to 26.60 million bpd. This increase occurred despite the new round of production cuts implemented by OPEC+. The modest rise was attributed to production increases in Iran and Saudi Arabia.
OPEC’s demand forecast for their crude oil suggests they have the potential to increase production throughout 2024. Their report estimates demand for OPEC crude to average 28.5 million bpd this year, exceeding their previous forecast by 100,000 bpd. This additional production capacity could help to meet the anticipated rise in summer demand.
Source: Reuters
