OPEC Sees Robust Oil Demand Next Year in First Look at 2025

OPEC Sees Robust Oil Demand Next Year in First Look at 2025

Time Stamp: January 18, 2024 12:00 AM
Source Node: 3077707

OPEC forecast that global oil demand will continue to increase strongly next year and exceed growth in supplies, according to the group’s first detailed assessment of 2025.

World consumption will swell by a “robust” 1.8 million barrels a day next year, driven by China and a recovering global economy, the Organization of Petroleum Exporting Countries said in its monthly market report. The forecast comes on the same day that the alliance’s top official published a rebuttal to predictions that oil demand is heading toward a peak.

OPEC sees rival supplies expanding by 1.3 million barrels a day next year. As a result, oil markets are set to remain in deficit through to the end of 2025 unless Saudi Arabia and its allies — which launched new production cuts this month — boost output significantly.

“Peak oil demand is not showing up in any reliable and robust short- and medium-term forecasts,” OPEC Secretary-General Haitham Al Ghais said in a separate statement, pushing back against expectations that climate change will cap the use of fossil fuels.

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Oil demand has surged in the past couple of years as the appetite for transport fuels bounced back from the pandemic, tempering hopes for a swift energy transition. But whether the boom in hydrocarbons will endure is a subject of great debate.

The International Energy Agency, which advises major oil consumers, projects that demand will decelerate sharply in 2024 and ultimately peak this decade thanks to the adoption of renewable energy and electric vehicles.

Brent crude has reflected estimates that oil supply growth is ahead of demand. Futures slumped almost 20% in the fourth quarter and are holding near $77 a barrel even as the conflict in the Middle East and attacks on shipping in the Red Sea threaten supplies from a critical exporting region.

OPEC is publishing estimates for the year ahead a few months earlier than normal “to offer more transparency and support for both consumers and producers,” its Vienna-based secretariat said.

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The organization expects global oil demand to increase by 2.25 million barrels a day this year to a record 104.36 million a day, unchanged from the forecasts in December’s report.

Its projections imply a market deficit of about 1.8 million barrels a day on average in 2024, even before OPEC and its allies implement additional output curbs pledged for the first quarter. The coalition promised to cut an additional 900,000 barrels a day from January 1, though analysts expect only around half of this will be implemented.

Whether OPEC’s bullish outlook will be borne out is far from clear. The group’s data had indicated an extremely tight market late last year, just as the group decided it was necessary to announce 900,000 barrels a day of additional cuts to keep supply and demand in balance. Its numbers pointed to a record supply shortfall in the fourth quarter of last year, belied by the slump in crude markets.

The full 22-nation OPEC+ coalition, which includes countries such as Russia, is due to hold an online monitoring meeting February 1. Ministers are next scheduled to meet in-person on June 1. Angola quit the organization this month, but its departure isn’t anticipated to affect supplies.

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