OPEC Still Sees Strengthening Oil Demand

Group Plans Supply Hike
oil refinery
Crude oil storage tanks at the Juaymah Tank Farm in Saudi Aramco's Ras Tanura oil refinery and oil terminal in Ras Tanura, Saudi Arabia. (Simon Dawson/Bloomberg)

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OPEC maintained forecasts for strengthening oil demand in the second half of the year, as the group and its allies prepare to revive some halted supplies.

World oil consumption will see a year-on-year increase of 2.3 million barrels a day in the second half, about 150,000 a day more than during the first, amid continued economic growth in China and other emerging economies, OPEC said in a monthly report. The estimates are considerably more bullish than others in the industry.

Led by Saudi Arabia, the Organization of Petroleum Exporting Countries and its partners unveiled a plan earlier this month to start gradually restoring roughly 2 million barrels a day of shuttered production from October. Prices initially slumped on the decision, but recouped losses as the coalition stressed that the hike could be postponed or called off.

Crude prices are trading near $81 a barrel in London, down about 12% from a peak reached in April, as OPEC’s supply restraints struggle to counter a flood of new oil from the Americas. China’s fragile economy and uncertainty over US monetary policy have also caused concerns about the strength of demand.

OPEC’s data indicate that the group and its allies should easily be able to manage the supply restart without destabilizing global markets or causing inventories to pile up. It projects that the full 22-nation OPEC+ alliance will need to provide 43.6 million barrels a day in the third quarter, or about 2.7 million a day more than it pumped last month.

But estimates from the organization’s Vienna-based secretariat are based on an assessment of demand that’s far stronger than most other forecasters.

OPEC forecasts that world consumption will swell by 2.2 million barrels a day this year — almost 50% higher than the rate anticipated a few months ago by Saudi Arabia’s state-run oil company. The organization expects demand will average 104.5 million barrels a day in 2024.

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For the first quarter, OPEC estimates that global oil consumption soared by 2.3 million barrels a day, more than double the increase observed by the International Energy Agency, an adviser to major economies in Paris.

OPEC’s forecasts have proved excessively bullish in the past. Last year, the group’s data pointed to a record inventory crunch of more than 3 million barrels a day in the fourth quarter. Instead, crude prices slumped 19% and the alliance was compelled to announce deeper production cutbacks to shore up the market.