OPEC trims call on its crude in next two years but buoyed by 'healthy' demand growth

OPEC remains bullish on global oil demand growth in the next two years but has nudged down the quantity of crude its members must produce to balance the market, according to the latest edition of its closely-watched monthly outlook.

The 12-member producers' group, which is battling to stabilize the oil market and boost prices amid global economic headwinds and wars in Europe and the Middle East, sees worldwide oil demand rising 2.25 million b/d in 2024 and 1.85 million b/d in 2025, it said Feb. 13. The predictions are unchanged from January.

In total, global liquids consumption will reach 104.4 million b/d this year and 106.25 million b/d in 2025, up 40,000 b/d each month on month, the report said.

However, the organization lowered the "call" on its crude -- the amount OPEC would have to pump to balance global supply with demand -- by 90,000 b/d in 2024 and 110,000 b/d in 2025, compared with January's estimates.

OPEC output will need to hit 28.38 million b/d in 2024 and 28.85 million b/d, the bloc now predicts.

Both predictions remain well above current OPEC production, giving the group a strong hand to influence prices the forecasts come to pass. In the report, OPEC said its members had pumped 26.34 million b/d in January, down slightly from 26.69 million b/d in December.

OPEC usually publishes predictions for the following year in July, but has pushed out its 2025 forecasts early, it said, to provide long-term guidance for the market.

Non-OPEC output

The report forecasts that non-OPEC oil production will rise 1.19 million b/d in 2024 and by 1.27 million b/d in 2025, with the latter unchanged month on month.

Non-OPEC producers including the US, Canada, Brazil and Guyana have stepped up output in recent months, reducing the bloc's market share and constraining its capacity to support prices.

By contrast, OPEC and its Russia-led allies, which together formed OPEC+ in 2017, have embarked on a series of overlapping production cuts since 2022, the most recent of which came into effect in January.

In addition to Saudi Arabia's and Russia's 1.5 million b/d of voluntary production and export cuts, extended through first-quarter 2024, other members have pledged to roll back a combined 696,000 b/d of production. Underproducing African members, including Nigeria and the Republic of Congo, have had their quotas cut.

Nevertheless, while OPEC's linchpin producer Saudi Arabia is pumping below 9 million b/d, levels not seen since the pandemic, others including Iraq and Kuwait continue to produce much above their output quotas, setting the stage for a potential compliance row in coming months.

The next OPEC+ decision will come in March, when the voluntary production cuts are set to expire. The group is due to meet next in Vienna June 1.

The multilayered output cuts have not succeeded in preventing a weak pricing structure at the start of 2024, fueled by demand uncertainty, high interest rates and record production in some non-OPEC countries.

Platts, a unit of S&P Global Commodity Insights, last assessed Dated Brent at $84.62/b on Feb. 12, having recovered from a December dip but well below the 2023 high of $97.92/b reached Sept. 27.

OPEC has blamed poor prices on financial speculators but said in the report that short selling had eased.

"Oil prices were further buoyed by stronger-than-expected macroeconomic data, specifically from the US, and signs of robust physical market fundamentals," it said.

Moving forward, OPEC remains optimistic about global economic growth, predicting a GDP increase of 2.7% in 2024 and 2.9% in 2025, driven by waning inflation and India and China.

Meanwhile, China and the Middle East will drive a "healthy" increase in oil consumption over the period, the report said, with demand growth of 600,000 b/d and 400,000 b/d, respectively.

"Continued robust economic activity in China, global air travel recovery and expected healthy petrochemical feedstock requirements will be key for oil demand growth in 2024," OPEC said in a feature article alongside the report. "However, inflation levels, monetary tightening measures and sovereign debt levels could weigh on global oil demand prospects in the current year."

Despite its caution, OPEC's 2024 demand projections are almost double those envisaged by the International Energy Agency. The organization, which represents industrialized countries, expects oil demand to rise 1.24 million b/d this year, according to a January oil market report.

The IEA predicts oil use to peak by the 2030s, while OPEC sees it rising in the next two decades.

Rounding off its update, OPEC estimated December OECD commercial oil stocks at 2.77 billion barrels of crude, down 52 million barrels from November's level.