Opec cuts forecast for oil demand growth

Reuters

• Expected growth now 2.1m bpd
• Still above historical average
• Production cuts may persist

Lacklustre growth in the Chinese economy has caused Opec to trim its bullish forecast for growth in international oil demand this year. 

The oil producers’ group said on Tuesday that it was cutting its expectation for growth in demand by the world economy by 6 percent, or 135,000 barrels per day (bpd), to 2.1 million bpd for 2024. 

Opec said that this was still above the historical average of an annual increase of 1.4 million bpd seen before the Covid-19 pandemic.

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The revision makes it less likely that Opec+ countries will be in a position to unwind voluntary production cuts of 2.2 million bpd later this year without flooding the market. 

The Opec study is sharply at variance with projections by the International Energy Agency, which expects oil demand to rise by only around 1 million bpd this year and to level off near 106 million bpd towards 2030.  

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Oil traded up slightly on Tuesday as geopolitical tensions sent Brent futures to $82.30 a barrel, a 3 percent rise, according to the National Bank of Kuwait.

This is still substantially below the $96 per barrel that the IMF and others estimate is necessary for Saudi Arabia, the world’s largest oil producer, to balance its books.

Markets are anticipating that Iran and perhaps Lebanese Hezbollah will launch a retaliatory strike on Israel after a senior Hamas official was killed in Tehran. 

In its monthly update, Opec reported that Saudi Arabia and Iraq had slightly increased production while Russia and Kazakhstan pumped slightly less. Iraq, Russia and Kazakhstan were due to have cut production after over-producing earlier in the year.