OPEC and its allies, known as OPEC+, have revised their forecasts for global oil demand growth downward for both 2024 and 2025, marking the third consecutive monthly decrease. This adjustment reflects a slowdown in global fuel consumption and significant economic challenges, particularly in China. In its October report, OPEC lowered its 2024 oil demand growth forecast to 1.93 million barrels per day (bpd), a reduction of 106,000 bpd from the previous estimate of 2.03 million bpd. Despite this downgrade, OPEC noted that the 2024 growth figure still exceeds the historical average of 1.4 million bpd observed before the COVID-19 pandemic disrupted global oil consumption.
A key factor in the downward revision is China’s economic situation, where challenges and a shift toward cleaner energy are expected to reduce crude oil demand. OPEC revised its forecast for China’s 2024 oil demand growth to 580,000 bpd, down from 650,000 bpd. Although government stimulus measures are expected to bolster demand in the fourth quarter, the long-term outlook is clouded by ongoing economic difficulties and the country’s transition to greener fuels. For 2025, OPEC cut its global oil demand growth estimate from 1.74 million bpd to 1.64 million bpd, reflecting broader uncertainties in the global energy landscape and differing opinions on China’s economic trajectory.
OPEC has implemented several output cuts since late 2022 to stabilize the oil market, with most of these reductions expected to remain in place until the end of 2025. Initially, the group planned to gradually restore some of its recent cuts totaling 2.2 million bpd starting in October, but the decision was postponed for two months due to declining oil prices. Although crude prices have been supported by rising tensions in the Middle East, the current price of $77 per barrel is still considered too low for several OPEC members. The cartel’s efforts to stabilize prices have also been hindered by non-compliance from countries such as Iraq, Kazakhstan, and Russia, which have exceeded their production quotas.
According to OPEC’s report, total output in September fell to 40.1 million bpd, a decline of 557,000 bpd from August. This decrease was largely due to unrest in Libya and reduced production in Iraq, which produced 4.11 million bpd—still above its quota of 4 million bpd but down by 155,000 bpd from the previous month. In contrast, Kazakhstan increased its output by 75,000 bpd to 1.545 million bpd, contrary to its earlier commitment to cut production. Russia also reduced its output by 28,000 bpd but remained above its production ceiling.
Despite these production cuts, OPEC projected a demand for its crude oil of 43.7 million bpd in the fourth quarter, indicating the potential for higher production levels in the coming months. OPEC+ is expected to make a decision regarding its December output adjustments in the coming weeks, with plans to gradually restore the previously cut 2.2 million bpd starting in December.
In response to OPEC’s latest downward revision of its demand growth outlook, oil prices fell by 2% on Monday, with Brent crude futures settling $1.58 lower at $77.46 per barrel, and US West Texas Intermediate (WTI) crude futures down $1.73 to $73.83 per barrel. This decline follows a week of gains for both benchmarks, with Brent rising by 99 cents and WTI climbing $1.18. China’s declining crude oil imports have contributed to the price drop, with data indicating a nearly 3% decrease in imports during the first nine months of 2024 compared to the same period last year, largely due to the growing adoption of electric vehicles (EVs) and slowing economic growth post-pandemic.
While OPEC’s policy decisions significantly influence the oil market, geopolitical risks remain a crucial factor. Investors are closely monitoring the situation in the Middle East, particularly regarding potential Israeli retaliation against Iran following an October 1 missile attack. Additionally, the US has announced plans to send troops to Israel and deploy advanced anti-missile systems. The strengthening US dollar, which reached a nine-week high on Monday, has also exerted downward pressure on oil prices, as a stronger dollar makes oil more expensive for buyers using other currencies.
