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.



Turkish Gold Demand Lifts Italian Jewellery Exports as Leather Goods Suffer

A person passes by a gold shop in Ankara, Türkiye May 29, 2023. REUTERS/Yves Herman/File Photo Purchase Licensing Rights
A person passes by a gold shop in Ankara, Türkiye May 29, 2023. REUTERS/Yves Herman/File Photo Purchase Licensing Rights
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Turkish Gold Demand Lifts Italian Jewellery Exports as Leather Goods Suffer

A person passes by a gold shop in Ankara, Türkiye May 29, 2023. REUTERS/Yves Herman/File Photo Purchase Licensing Rights
A person passes by a gold shop in Ankara, Türkiye May 29, 2023. REUTERS/Yves Herman/File Photo Purchase Licensing Rights

A surge in demand for gold from inflation-stricken Türkiye boosted exports of jewellery from Italy's industrial district of Arezzo in Tuscany, data showed on Monday, offsetting a drop in leather goods sales from the nearby Florence area.

Demand from Türkiye, where inflation was running at 61.8% in July, drove jewellery exports from the Arezzo area up 133% in the first quarter of the year versus 2023, an Intesa Sanpaolo report on Italy's industrial districts showed.

Exports from the other two Italian jewellery districts, the northeastern Vicenza area and Valenza Po, in Piedmont, also rose.

Gold is considered a hedge against higher inflation and a safe store of value in times of uncertainty, Reuters reported.

Exports from the Arezzo jewellery district totalled 1.8 billion euros ($2 billion) in the first quarter, from 800 million a year before, Intesa said.

That is welcome news for the Tuscan economy, which has been hit hard by the global slowdown in luxury goods demand, with exports of leather goods from the Florence district down 23% in the first quarter to 1.35 billion euros.

Tuscany is home to hundreds of small suppliers of the luxury goods industry and a cooling in demand led by China, which has dealt a blow to brands like Kering's Gucci, prompted companies to put thousands of local workers on furlough.

"Districts that supply the fashion industry have suffered from a drop in consumer spending, but also a normalisation of stock levels after two years of strong increase, and the reorganisation of logistics by distributors," the report said.

Meanwhile, Tuscan olive oil exports jumped 72% year-on-year to 382 million euros in the first quarter.

Overall, exports from Italy's industrial districts - small hyper-specialised production areas - fell 1.1%, Intesa said, adding slowing world trade had been driving a decline since spring 2023 - though from high levels.

The districts' exports hit a record high in 2022 above 150 billion euros and remained broadly stable in 2023. Exports are above pre-pandemic levels by nearly 20% overall.

The only exception are intermediate goods exports in the fashion industry which are 10% lower than in the first quarter of 2019.