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Opec and IEA poles apart on oil supply predictions

Opec has kept its oil demand growth forecast at 2.2 million bpd Reuters/Leonhard Foeger
Opec has kept its oil demand growth forecast at 2.2 million bpd
  • IEA forecasts demand growth of 1m bpd
  • Opec sticks with 2.2m bpd increase
  • Both agree China will hold sway

Opec and the Paris-based International Energy Agency (IEA) have this week both issued reports with vastly differing predictions for the outlook for global crude production in the coming years.

However, the opposing organisations agree on one thing: that China will be the determining factor in production and prices this year.

In its latest annual medium-term market report, the IEA forecast on Wednesday that total supply capacity will rise to nearly 114 million barrels a day (bpd) by the end of the decade, “a staggering 8 million bpd above projected demand”.



These levels have never been seen before other than during the Covid-19 lockdowns in 2020, the IEA said.

“As the pandemic rebound loses steam, clean energy transitions advance, and the structure of China’s economy shifts, growth in global oil demand is slowing down and set to reach its peak by 2030,” said Fatih Birol, the IEA’s executive director. 

The IEA expects oil demand to rise by around 1 million bpd this year and to level off near 106 million bpd towards 2030. “The companies may want to give a fresh look at their business strategies and align with market realities,” said Birol.

This forecast differs greatly from Opec’s outlook. In its monthly report published on Tuesday, the oil producers’ club kept its oil demand growth forecast at 2.2 million bpd.

Brent traded nearly 1 percent up at $82.58 a barrel on Wednesday afternoon, while West Texas Intermediate (WTI) rose to $78.64. 

Crude prices recovered around 7 percent in one week after traders overreacted to Opec+’s decision to bring the supply of 2.2 million bpd back to the market over the 12 months beginning in October.

The organisation will still keep around 3.6 million bpd off the market until the end of 2025.

IEA expects non-Opec+ producers, such as the US, Canada, Guyana, Brazil and Argentina, to account for 76 percent of the capacity build net increase. 

Both organisations expect fast-growing Asian economies to drive the demand. China will continue to dominate growth in petrochemicals.

“The ongoing air travel recovery, healthy driving levels, and improvements in manufacturing sector activities are projected to support jet/kerosene, gasoline, and distillate demand in the region,” Opec said.

Recent reports have said that China's oil imports from Saudi Arabia are expected to fall for a third month in July to around 36 million barrels.

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