OPEC Sticks to 2024 Oil Demand View, Sees Strong Travel Season

File photo: A person puts gas in a vehicle at a gas station in Manhattan, New York City, US, August 11, 2022. REUTERS/Andrew Kelly/File photo Purchase Licensing Rights
File photo: A person puts gas in a vehicle at a gas station in Manhattan, New York City, US, August 11, 2022. REUTERS/Andrew Kelly/File photo Purchase Licensing Rights
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OPEC Sticks to 2024 Oil Demand View, Sees Strong Travel Season

File photo: A person puts gas in a vehicle at a gas station in Manhattan, New York City, US, August 11, 2022. REUTERS/Andrew Kelly/File photo Purchase Licensing Rights
File photo: A person puts gas in a vehicle at a gas station in Manhattan, New York City, US, August 11, 2022. REUTERS/Andrew Kelly/File photo Purchase Licensing Rights

OPEC stuck to its forecast for relatively strong growth in global oil demand in 2024 and next year, saying on Wednesday that resilient economic growth and air travel would support fuel use in the summer months.

The Organization of the Petroleum Exporting Countries, in a monthly report, said world oil demand would rise by 2.25 million barrels per day (bpd) in 2024 and by 1.85 million bpd in 2025. Both forecasts were unchanged from last month.

"Expected strong mobility and air travel in the Northern Hemisphere during the summer driving/holiday season is anticipated to bolster demand for transportation fuels and drive growth in the United States," OPEC said in the report.

OPEC+, which groups OPEC and allies such as Russia, has implemented a series of output cuts since late 2022 to support the market. The group agreed on June 2 to extend the latest cut of 2.2 million bpd until the end of September and gradually phase it out from October.

OPEC also raised its forecast for world economic growth this year to 2.9% from 2.8%, and said there was potential upside to that number, citing momentum outside developed countries in the Organization for Economic Cooperation and Development.

Oil prices edged lower on Monday, reversing course after four weeks of gains, as hopes of a ceasefire deal in Gaza eased worries of tightening supply.

"Economic growth momentum in major economies remained resilient in the first half. This trend supports an overall positive growth trajectory in the near term," OPEC said, Reuters reported.

Oil was steady after the OPEC report was released, with Brent crude trading below $85 a barrel.

OPEC's forecasts are at the high end of what the industry expects and while it has not forecast a timeline for when demand will peak, BP expects it to do so next year in both of the two main scenarios in its annual Energy Outlook, published on Wednesday.

The International Energy Agency, which represents industrialized countries, expects much lower 2024 demand growth than OPEC, of 960,000 bpd, and is scheduled to provide an update on its view on Thursday.



Turkish Firms Face Wave of Closures Amid Economic Reckoning 

Leftover textile materials are seen outside a shut-down textile factory at the organized industrial zone in Corum, Türkiye, August 23, 2024. (Reuters)
Leftover textile materials are seen outside a shut-down textile factory at the organized industrial zone in Corum, Türkiye, August 23, 2024. (Reuters)
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Turkish Firms Face Wave of Closures Amid Economic Reckoning 

Leftover textile materials are seen outside a shut-down textile factory at the organized industrial zone in Corum, Türkiye, August 23, 2024. (Reuters)
Leftover textile materials are seen outside a shut-down textile factory at the organized industrial zone in Corum, Türkiye, August 23, 2024. (Reuters)

It is hard for Dogan Duman to see how he can keep his garment factory in central Türkiye running much longer, even after firing a third of his staff to cut costs that have soared for companies nationwide, generating a wave of bankruptcies and closures.

Idle sewing machines are pushed to the side of his factory floor in Corum, where outside "For Sale" signs and padlocked gates dot the small city's once-buzzing industrial zone.

Such sober scenes are spreading across Türkiye as part of the fallout from a more than year-long policy-tightening effort, including a 50% benchmark interest rate, to rein in years of soaring inflation and overheated demand.

Thousands of companies like Duman's - which makes coats and jackets for global fashion brand Zara - are squeezed by inflation that topped 75% earlier this year, an overvalued lira, hikes to electricity and gas prices and dwindling export orders.

"The orders are shrinking daily because we are losing our competitiveness... and I think they will shrink even more," he said of his 27-year-old company that is now down to 60% capacity and 210 employees.

Türkiye is one of the world's top five garment manufacturers and a critical source for Europe's top brands. But despite its advantage of proximity to Europe, its main trade partner, Duman says swelling energy, labor and FX costs have left him trailing rivals in Vietnam and Bangladesh.

"Considering the current lira exchange rate and the expected further rise to minimum wage next year, I think we won't be able to compete," he said. "We will be at a point of shutdown."

These days, Turkish households and business are facing the economic consequences of a cumulative 41.5 percentage points of rate hikes that began in June last year and are now finally beginning to cool inflation, which dipped to 52% last month.

Last year's dramatic policy U-turn, including fiscal steps, aims to leave behind years of soaring prices and currency crashes under President Recep Tayyip Erdogan's formerly unorthodox approach of monetary easing to stoke growth.

But with credit now out of reach for many, and lira depreciation badly lagging monthly price rises, companies, especially apparel and textile exporters, are in a crunch.

Almost 15,000 companies closed down in the first seven months of the year, up 28% from 2023, according to the Union of Chambers and Commodity Exchanges of Türkiye.

Other data suggest bankruptcy stress is brewing.

Monitoring outlet konkordatotakip.com says 982 companies were granted initial court protection from debt in the first eight months of the year, almost double last year's total.

Construction and textile firms have made the largest number of such applications to suspend debt payments to banks and suppliers to continue operations, and also for bankruptcy proceedings.

Such company strains have knock-on effects, slowing or halting payments across the economy and lifting joblessness.

There may be "heavy costs," said Erdal Bahcivan, chairman of Istanbul Chamber of Industry. "While trying to save a company, dozens of (creditor) firms may end up in dire straits."

Some economists say that given the aggressive tools used to slay inflation, rising unemployment and bankruptcies are all but certain.

"This is a serious dilemma for the government," said Seyfettin Gursel, director at Bahcesehir University Center for Economic and Social Research. "It is trying to put the monster it created back into its lair, but doesn't know how to do it".

STREWN GARMENTS

In Corum, 500 kilometers east of Istanbul, some factories have broken windows and one had dozens of colorful rain-drenched garments strewn across its grassy yard.

Bulent Demirci, co-owner of a yarn factory in the city with 50 workers, said he shut it down a couple of months ago due to an "unpredictable economic outlook".

"We had production cuts from time to time in the past. But this time it is all doom and gloom," he said.

Ankara's latest hike to the minimum wage was to 17,002 liras ($500) in January, which is up 100% from a year earlier and 500% from the end of 2021, when a historic lira crash rocked Türkiye.

Gas and electricity prices have risen about sevenfold and threefold respectively since 2021 for small to mid-scale manufacturers.

Türkiye’s overall production costs are now almost 40% higher than in competing Asian countries in dollar terms, according to interviews with exporters, who also blame barriers to financing and dwindling working capital.

Exporters have lobbied for more currency depreciation given that, year-to-date, inflation is 32% while the lira has fallen only 13% to the dollar. Authorities however have urged lira holdings, helped along by high deposit rates.

Istanbul-traded Mega Polietilen and garment manufacturer 3F Tekstil are among those that applied for court protection from debt payments.

An executive at 3F who requested anonymity said the move helped as it struggled to survive with a total 600 workers, and to continue supplying fashion brands such as Mango and H&M.

"But our suppliers and those who have receivables will suffer more in this process," amounting to roughly 10,000 workers at outsourced manufacturers across the country, the executive said.

"When interest rates reached 60-70% the companies could not bear it. They cannot manage their debt," he said. "Businesses have paid for high inflation in Türkiye."