OPEC Cuts Oil Demand Growth Forecast, Highlighting Dilemma over Oct Hike

A view shows the logo of the Organization of the Petroleum Exporting Countries (OPEC) outside its headquarters in Vienna, Austria, May 28 , 2024. REUTERS/Leonhard Foeger/ File Photo Purchase Licensing Rights
A view shows the logo of the Organization of the Petroleum Exporting Countries (OPEC) outside its headquarters in Vienna, Austria, May 28 , 2024. REUTERS/Leonhard Foeger/ File Photo Purchase Licensing Rights
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OPEC Cuts Oil Demand Growth Forecast, Highlighting Dilemma over Oct Hike

A view shows the logo of the Organization of the Petroleum Exporting Countries (OPEC) outside its headquarters in Vienna, Austria, May 28 , 2024. REUTERS/Leonhard Foeger/ File Photo Purchase Licensing Rights
A view shows the logo of the Organization of the Petroleum Exporting Countries (OPEC) outside its headquarters in Vienna, Austria, May 28 , 2024. REUTERS/Leonhard Foeger/ File Photo Purchase Licensing Rights

OPEC on Monday cut its forecast for global oil demand growth in 2024 citing softer expectations for China, a reduction that highlights the dilemma faced by the wider OPEC+ group in raising production from October.

This is the first cut in OPEC's 2024 forecast since it was made in July 2023, and comes after mounting signs that demand in China has lagged expectations due to slumping diesel consumption and as a crisis in the property sector hampers the economy.

In a monthly report on Monday, the Organization of the Petroleum Exporting Countries said world oil demand will rise by 2.11 million barrels per day in 2024, down from growth of 2.25 million bpd expected last month.

According to Reuters, there is a wide split in 2024 demand growth forecasts due to differences over China and the pace of the world's transition to cleaner fuels. OPEC is still at the top of industry estimates and has a long way to go to match the International Energy Agency's far lower view.

"This slight revision reflects actual data received for the first quarter of 2024 and in some cases for the second quarter, as well as softening expectations for China's oil demand growth in 2024," OPEC said in the report.

OPEC said this year's demand growth was still above the historical average of 1.4 million bpd seen prior to the COVID-19 pandemic in 2019, which caused a plunge in oil use, and that summer travel demand would remain robust.

"Despite the slow start to the summer driving season compared to the previous year, transport fuel demand is expected to remain solid due to healthy road and air mobility."

In the report, OPEC also cut next year's demand growth estimate to 1.78 million bpd from 1.85 million bpd previously, also at the top end of what the industry expects.

Oil last week touched the lowest price this year near $75 a barrel on concerns about Chinese demand and a possible US recession. Prices were steady after the report was released, trading above $80.

OPEC+, which groups OPEC and allies such as Russia, has implemented a series of output cuts since late 2022 to support the market, most of which are in place until the end of 2025.

On Aug. 1, OPEC+ confirmed a plan to start unwinding the most recent layer of cuts of 2.2 million bpd from October, with the caveat that it could be paused or reversed if needed.

The group still has a month to decide whether to start releasing the oil from October, and will study oil market data in the coming weeks, a source close to OPEC+ said last week.



Gold Gains on Fed Rate Cut Hopes

Gold bars from the vault of a bank are seen in this illustration picture taken in Zurich November 20, 2014. REUTERS/Arnd Wiegmann/File Photo
Gold bars from the vault of a bank are seen in this illustration picture taken in Zurich November 20, 2014. REUTERS/Arnd Wiegmann/File Photo
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Gold Gains on Fed Rate Cut Hopes

Gold bars from the vault of a bank are seen in this illustration picture taken in Zurich November 20, 2014. REUTERS/Arnd Wiegmann/File Photo
Gold bars from the vault of a bank are seen in this illustration picture taken in Zurich November 20, 2014. REUTERS/Arnd Wiegmann/File Photo

Gold prices rose on Thursday on expectations of a US Federal Reserve rate cut next week, while palladium hit its highest in more than two months due to supply concerns from top producer Russia.
Spot gold was up 0.3% at $2,517.88 per ounce by 0942 GMT, supported by the 21-day moving average at $2,505, Reuters reported.
US consumer prices rose marginally in August, but underlying inflation signaled some stickiness, which could result in the Fed delivering a smaller 25-basis-point cut at its meeting next week.
"Judging by gold's reaction to the latest US inflation data, it seems as if today's expectations of moderately lower US interest rates are sufficient to support prices around current levels of $2,500 per ounce at least in the short term," said Carsten Menke, an analyst at Julius Baer.
Traders are waiting for the US Producer Price Index (PPI) for August, the initial jobless claims print due later today and the consumer sentiment data on Friday for more clues on the Fed's path.
Palladium gained 0.6% to $1,014 per ounce. It earlier hit $1,030.68, the highest since July 8, on supply concerns after Russian President Vladimir Putin on Wednesday said that Moscow should consider limiting exports of uranium, titanium and nickel.
"Palladium is the market that is up for a short-covering rally. Putin did not mention palladium. But since the metal is a by-product of Russian nickel production, such export curbs could drive down production of both metals and deepen the current deficit in the palladium market," said WisdomTree commodity strategist Nitesh Shah.
Russia's Nornickel is the world's largest producer of palladium and a major producer of platinum, accounting for 41% and 12% of global mining output, respectively.
Spot silver added 0.4% to $28.81 and platinum gained 0.3% to $953.79.