'Call' on OPEC+ crude in 2024, 2025 trimmed again in bearish update

OPEC sees weaker demand for OPEC+ crude in 2024 and 2025 than it did a month ago, with estimates of global oil consumption revised down and supply from non-OPEC+ countries ticked up.

Striking a bearish tone in its closely watched monthly oil market report Aug. 12, the producers group said the "call" on the OPEC+ alliance's crude -- the volume of oil it must produce to balance the market -- would be 43.0 million b/d in 2024 and 43.6 million b/d in 2025.

That is down 100,000 b/d and 300,000 b/d respectively from July's forecast and marks the second successive monthly reduction.

OPEC noted, however, that July output by the OPEC+ alliance -- which includes its Russia-led allies -- averaged 40.91 million b/d, according to seven secondary sources including the Platts OPEC+ Survey from S&P Global Commodity Insights. This means it would have a strong hand to influence the market if its expectation for the call on OPEC+ crude comes to pass.

The report nevertheless struck a less optimistic tone than in recent months, with downward revisions to forecasts for both world oil demand and year-on-year demand growth.

"Market sentiment was further affected by uncertainty surrounding central bank monetary policies, particularly prospects for prolonged high interest rates in the US as a means of addressing ongoing inflation. Additionally, concerns about China's economic performance and demand growth, coupled with a slower-than-expected onset of the driving season, contributed to the downward pressure on prices," the report said.

OPEC's expectation for 2024 world oil demand had remained unchanged at 104.46 million b/d since March, but the group has now dropped its forecast by 140,000 b/d to 104.32 million b/d, leaving its expectation for year-on-year demand growth in 2024 at 2.11 million b/d, down from 2.25 million b/d.

"This slight revision reflects actual data received for Q1 and in some cases Q2, as well as softening expectations for China's oil demand growth in 2024," the report noted.

Its long-held view of oil demand and demand growth in 2025 has also been revised down by 200,000 b/d and 70,000 b/d respectively to 106.11 million b/d and 1.78 million b/d respectively, although they remain more bullish than forecasts by Commodity Insights analysts.

The only key indicator nudged up in August is expectations of non-OPEC+ supply, which has been increased by 20,000 b/d for both 2024 and 2025. OPEC sees the US, Brazil, Canada and Norway driving output growth.

Sluggish demand

A weaker demand outlook comes as OPEC+ ministers are fighting to shore up global oil markets, after seeing prices weaken in recent weeks. Platts Dated Brent fell from almost $90/b in early July to as low as $76.27/b on Aug. 6, but then rallied to $81.62/b on Aug. 9. Platts is part of Commodity Insights.

Analysts have attributed the price dip to sluggish Chinese demand, high interest rates in major economies and impressive output from non-OPEC members, particularly in the Americas.

Meanwhile, elevated Middle East tensions stemming from the Israel-Hamas war and 5.8 million b/d of overlapping supply cuts by the OPEC+ alliance have put a floor under prices.

Those efforts could still be jeopardized by poor quota compliance, with Iraq, Kazakhstan and Russia continuing to overproduce their quotas in July, according to the secondary sources, despite the trio submitting compensation plans to OPEC on July 24. On Aug. 9, Russia's energy ministry said it remained committed to its OPEC+ compensation plan despite overproducing its quota by 67,000 b/d in July.

Secondary sources saw Iraqi production rising 57,000 b/d in July to 4.251 million b/d, according to the August report, while Russian and Kazakh output fell by 26,000 b/d and 34,000 b/d respectively.

On Aug. 1, at the last meeting of the Joint Ministerial Monitoring Committee, which oversees production cut implementation, ministers agreed to proceed with plans to slowly unwind 2.2 million b/d of voluntary cuts -- undertaken by a core group -- from September, subject to market conditions. Analysts said such action could weaken oil prices further.

An additional 3.6 million b/d of group-wide cuts are currently in place until the end of 2025.

The JMMC will convene again Oct. 2, followed by the OPEC+ alliance's next full ministerial meeting scheduled for Dec. 1 in Vienna.

Rounding off its August report, OPEC estimated total OECD commercial oil and product stocks -- which are subject to a two-month delay -- were down by around 14.1 million barrels on the month in June to 2.831 billion barrels.

It estimates that crude stocks fell 17.3 million barrels month-on-month to 1.366 billion barrels, and products stocks rose by 3.1 million barrels to 1.467 billion barrels in June.