OPEC and the International Energy Agency (IEA) again forecasted different short and medium-term global oil demand growth, reports issued by both organizations revealed this week, while OPEC's forecasts are at the high end of what the industry expects.
The Organization of the Petroleum Exporting Countries 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.
But the IEA said global oil demand growth will slow to just under a million barrels per day (bpd) this year and next, as Chinese consumption contracted in the second quarter due to economic problems.
Global demand in the second quarter rose by 710,000 bpd year on year in its lowest quarterly increase in over a year, the IEA, which advises industrialized countries, said in its monthly oil report.
“China's pre-eminence (is) fading. Last year the country accounted for 70% of global demand gains – this will decline to around 40% in 2024 and 2025,” the IEA said.
It left its forecast for relatively low oil demand growth of 970,000 bpd this year largely unchanged from its outlook last month, and trimmed its growth forecast for next year by 50,000 bpd to 980,000.
As the post-COVID economic rebound flattens out worldwide, the IEA added, lackluster economic growth, increased energy efficiency and the rise of electric vehicles will act as headwinds for growth this year and next.
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, 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.
Oil forecasters are split more widely than usual on the strength of oil demand growth for 2024 and the medium term, partly due to differences over the pace of the world's transition to cleaner fuels. Earlier on Wednesday, BP said oil demand would peak next year.
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.
“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.
OPEC's report points to an oil supply deficit in coming months and in 2025 - a larger deficit than the shortfall predicted on Tuesday by US government forecaster the Energy Information Administration.
The OPEC report also projects demand for OPEC+ crude, or crude from OPEC plus the allied countries working with it, at 43.6 million bpd in the third quarter, much more than the group is currently pumping, according to the report.
Meanwhile, oil prices settled higher on Thursday after a jump in US refining activity last week drove a larger-than-expected decline in gasoline and crude inventories.
Brent crude futures were up 25 cents, or 0.29%, at $85.33 per barrel by 10:53 GMT. US West Texas Intermediate (WTI) crude futures rose 17 cents, or 0.21%, to $82.27 per barrel.
The US Energy Information Administration reported that US crude inventories fell by 3.4 million barrels to 445.1 million barrels in the week ended July 5, far exceeding analysts' expectations in a Reuters poll for a 1.3 million-barrel draw.
Gasoline stocks fell by 2 million barrels to 229.7 million barrels, much bigger than the 600,000-barrel draw analysts expected during US Fourth of July holiday week.
But gains were capped due to minimal supply disruptions from Hurricane Beryl.
Markets were anticipating US inflation data to be released later, including the Consumer Price Index, and the Producer Price Index report on Friday which could give market signals.
Federal Reserve Chair Jerome Powell said on Wednesday the US central bank will make interest rate decisions “when and as” they are needed, pushing back on a suggestion that a September rate cut could be seen as a political act ahead of the fall presidential election.
