OPEC forecasts 'healthy' global oil demand growth, thanks to China

OPEC on July 13 revised up its 2023 global oil demand growth forecast to 2.44 million b/d on the back of a stronger Chinese economy, and, in its first look at 2024, said it expects another "healthy" 2.25 million b/d rise for the year.

The 2023 and 2024 demand figures far outpace OPEC's estimate of non-OPEC supply growth, pegged at 1.41 million b/d and 1.39 million b/d, respectively.

And they stand in stark contrast to the rival International Energy Agency's forecast, issued earlier July 13, which rolled back 2023 oil demand growth to 2.2 million b/d, while projecting 2024 at 1.1 million b/d -- less than half the rate of increase of OPEC's.

The bullish outlook, contained in OPEC's closely followed monthly oil market report, comes as the producer bloc and its allies, including Russia, make deep output cuts, in a bid to drive what they say are negative speculators out of the market.

In its report, OPEC credited the cuts for creating conditions to support relatively strong demand growth.

The OPEC+ alliance's "successful approach of being precautious, proactive and pre-emptive and the carefully devised production adjustments have added a considerable measure of stability to global oil market, based on which the solid oil market fundamentals seen this year are expected to extend into 2024," the report stated.

The 2023 demand forecast was revised up 90,000 b/d from OPEC's last analysis in June, with total world oil demand expected to hit 102.00 million b/d.

For 2024, demand is set to reach 104.25 million b/d, an increase of 2.25 million b/d, with China expected to contribute 580,000 b/d -- or 26% -- of total consumption growth.

On the supply side, US production is forecast to rise 1.08 million b/d in 2023, making up 77% of global non-OPEC liquids growth for the year, and more than offsetting the expected 750,000 b/d decline in Russian output.

For 2024, US production will build another 68,000 b/d to lead global non-OPEC supply growth of 1.39 million b/d, while Russia is expected to remain flat year-on-year.

Tightening the market

As a result, the so-called call on OPEC crude -- how much the group would have to pump to balance global supply with demand -- will rise to 30.01 million b/d in the third quarter and 30.78 million b/d in the fourth quarter, according to the analysis.

And it will remain above 30 million b/d for much of 2024, for a full-year average of 30.21 million b/d.

That is significantly above OPEC's June output of 28.19 million b/d, according to independent secondary sources used by the secretariat, with several members making voluntary cuts under a deal announced in April.

OPEC production is set to drop further this summer, with Saudi Arabia having announced it will make an extra unilateral cut of 1 million b/d for July and August, while non-OPEC ally Russia has committed to a 500,000 b/d drop in crude exports for August.

The production restraint should shrink global oil stocks significantly and reverse the last few months of builds. Commercial inventories held by OECD countries were up 20.2 million barrels in May to stand at 2.815 billion barrels, an increase of 139 million barrels over the same month a year ago, according to the OPEC report.

OPEC forecasts

Unit: million b/d

Source: OPEC monthly oil market report