OPEC optimistic on global oil demand growth in 2024, 2025 on strong economic forecasts

Global oil demand growth is forecast to far outpace the expected rise in non-OPEC supply over the next two years, OPEC said Jan. 17, as the producer group charts its course to manage the market ahead.

In its closely watched monthly oil market report, OPEC estimated the world's thirst for oil to increase 2.25 million b/d in 2024 and another 1.8 million b/d in 2025, on the back of a strengthening Chinese economy.

Meanwhile, non-OPEC liquids production was expected to grow more slowly, at 1.34 million b/d in 2024 and 1.27 million b/d in 2025, with the US, Canada, Guyana and Brazil leading the gains.

Should the forecasts come to pass, that would leave OPEC in a strong position to influence prices, as the call on OPEC crude -- the amount the bloc would have to pump to balance global supply with demand -- is well above its current output, currently reined in through a series of production cuts.

OPEC estimated the call on its crude at 28.49 million b/d for 2024 and 28.96 million b/d for 2025, above output of 26.7 million b/d in December 2023, according to secondary sources used by the organization to monitor production.

That came after a year in which global oil consumption exceeded supply by 640,000 b/d in 2023, OPEC said in the report.

Despite its optimism, OPEC, alongside its allies in OPEC+, is maintaining a policy of aggressive supply cuts for 2024.

Several members of the group, including Russia and Saudi Arabia, committed at a Nov. 30 meeting to continue and deepen cuts in the first quarter of 2024. If adhered to, they would take an additional 700,000 b/d of supply off the market.

The move has failed to boost prices so far. Platts assessed Dated Brent at $79.89/b on Jan. 16, below the assessment of $82.28/b on Nov. 29 -- the day before the latest cuts were announced.

OPEC kingpin Saudi Arabia reported December production of 8.944 million b/d, below its quota under the OPEC+ accord of 8.98 million b/d.

2025 outlook

It was OPEC's first forecast of 2025 market fundamentals. It typically waits until July to begin releasing its forecasts of the following year's outlook, but OPEC said it decided to move up its reporting to offer more transparency and help guide policy for both consumers and producers.

The OPEC+ alliance is next scheduled to meet in Vienna June 1, though ministers have said they could convene earlier, if needed, to adjust production quotas as market conditions warrant.

OPEC's positive demand growth projections are based on an expected economic growth of 2.8% in 2025, compared to 2.6% in 2024, on declining inflation and expectations for key policy rates to peak in the first half of 2024.

Despite some predictions of peak oil demand by the end of the decade, OPEC Secretary General Haitham al-Ghais said in an article published Jan. 17 that there is no sign of this in short and mid-term forecasts.

"There are many reasons behind this. For example, a pushback from populations comprehending the implications of ambitious and unrealistic net zero policy agendas, policymakers reevaluating their approach to energy transition pathways, and faster industrialization in developing countries, where we are seeing the emergence of a larger middle class, an expansion in transport services, and greater energy demand and access," he said.

OPEC estimates that global demand will reach 116 million b/d by 2045.

There has been a spurt in attacks on oil supply infrastructure in the Middle East amid production and supply risks linked to the war in Ukraine. However, OPEC said it did not see political and geopolitical developments materially altering the momentum of growth.

On the supply side, it forecast non-OPEC upstream investment to drop to $473 billion in 2025 from $482 billion in 2024 and $487 billion in 2023.

OPEC estimated OECD commercial oil stocks at 2.819 billion barrels as of November 2023, up 7.3 million barrels month on month. That included an increase in crude stocks of 17.5 million barrels and a 10.2 million barrels fall in products stocks month on month.

November oil stock levels were 25 million barrels above November 2022 levels but 62 million barrels lower than the latest five-year average, according to OPEC.