Global oil demand growth must pick up pace in the coming months, or the market may struggle to absorb the planned increase in oil supply by OPEC+ starting in October, according to a Reuters report. Demand growth from major consumers like the United States and China in the year’s first seven months has fallen short of some expectations. This shortfall occurred even before renewed fears of a U.S. recession triggered a global sell-off in stocks and bonds this week.
If the economy slows further, oil demand growth is likely to decelerate as well. In such a scenario, OPEC+ might have to either postpone its planned production increase or face lower prices for higher output, analysts warned.
In August, the price of oil dipped below $80 per barrel, a level insufficient for most OPEC+ members—including key allies like Russia—to balance their budgets. In the U.S., oil consumption through July increased by 220,000 barrels per day (bpd) year-on-year, averaging 20.25 million bpd, according to Reuters calculations based on government data. To meet the government’s 2024 forecast of 20.5 million bpd, demand will need to rise further.
However, predicting whether global demand will reach the levels needed to absorb additional supplies this year is challenging due to significant discrepancies in demand estimates from leading analysts, including OPEC and the International Energy Agency (IEA).
Oil consumption data often lags, and preliminary figures are subject to revisions, leading forecasters to include best estimates in their projections. OPEC estimates global demand growth at 2.15 million bpd for the first half of 2024, while the IEA places it at 735,000 bpd.
While OPEC’s estimate for first-half demand growth remains relatively unchanged from the start of the year, the IEA has reduced its forecast from 1.19 million bpd in January. A key factor in these differing outlooks is China’s oil consumption. The IEA estimates that China’s consumption contracted in the second quarter, whereas OPEC estimates it increased by over 800,000 bpd, significantly influencing the full-year projections.
OPEC+ confirmed last week that it plans to begin increasing production in October, but with the flexibility to pause or reverse the decision if necessary. This increase hinges on demand meeting OPEC’s projections, which would raise the need for oil from the group and its allies, who currently supply over 40% of the world’s crude.
If OPEC’s demand forecast materialises, the need for crude from OPEC+ countries is expected to rise to 43.9 million barrels per day (bpd) in the fourth quarter, up from 40.8 million bpd in June. This would, in theory, create room for additional output.
OPEC+ has about a month left to decide whether to proceed with releasing more oil from October, with the group planning to closely monitor oil market data in the coming weeks, according to a source close to the organization. Saudi Aramco CEO Amin Nasser stated last week that he anticipates demand growth of between 1.6 million and 2 million bpd in the second half of the year.
