KEY POINTS
- OPEC lowers 2024 global oil demand forecast for the second time
- China’s economic challenges and cleaner fuel adoption impact demand projections
- Brent crude prices fall to their lowest levels since March 2023
The Organization of the Petroleum Exporting Countries (OPEC) has once again reduced its forecast for global oil demand growth in 2024 and 2025.
The latest cut marks the second consecutive downward revision as economic challenges in key markets, including China, continue to weigh on demand.
OPEC now projects that global oil demand will rise by 2.03 million barrels per day (bpd) in 2024, down from last month’s forecast of 2.11 million bpd.
This adjustment has been made Amid escalating fear over China slowing down economy and the transition to cleaner fuels on the market.
The lower demand indicates the difficulties that OPEC and its partners, referred to as OPEC+, have in managing the market. Last week, OPEC+ delayed plans to increase oil production after prices dropped to the lowest levels seen this year.
China and Cleaner Fuels Impact Demand Forecast
A significant portion of the demand revision is attributed to China.
OPEC lowered its forecast for Chinese demand growth to 650,000 bpd, down from 700,000 bpd, citing economic headwinds and a shift toward cleaner energy solutions, such as liquefied natural gas (LNG) trucks and electric vehicles.
Despite the downgrade, OPEC remained cautiously optimistic about China’s overall economic performance but acknowledged the long-term challenges posed by structural issues in the country’s real estate sector and its growing adoption of cleaner technologies.
“China’s economic growth is expected to remain well-supported, but headwinds will affect diesel and gasoline demand moving forward,” OPEC stated in its report.
Following the release of OPEC’s updated forecast, Brent crude prices fell slightly, trading below $71 per barrel. This places oil prices near their lowest levels since March 2023.
Mixed Industry Projections and Production Cuts
OPEC’s demand forecast remains on the higher end of industry estimates, with a notable gap between its projections and those of the International Energy Agency (IEA).
The IEA, which is expected to release updated figures later this week, has consistently presented more conservative demand growth forecasts. The IEA’s current estimate for global oil demand growth in 2024 is 970,000 bpd—significantly lower than OPEC’s outlook.
Despite the weaker demand outlook, OPEC remains upbeat on the broader economic front, raising its 2024 global economic growth forecast slightly to 3 percent. The group maintained its 2025 economic growth forecast at 2.9%.
OPEC+ has been actively managing supply since 2022 through a series of output cuts aimed at stabilizing the market.
According to Reuters, the group was initially set to begin scaling back these cuts by October, but last week decided to delay this plan by two months after oil prices slumped. Based on OPEC’s latest report, production across OPEC+ member countries fell in August, largely due to unrest in Libya, which disrupted the country’s oil output.
