OPEC maintains global oil demand outlook unchanged

The Organisation of the Petroleum Exporting Countries (OPEC) has maintained its 2024 and 2025 global oil demand growth forecasts unchanged at 2.25 million barrels per day (bpd) and 1.85 million bpd, respectively, it said in a monthly report released on Wednesday.

“The OECD oil demand in 2024 is expected to expand by around 0.2 mb/d, while the non-OECD is forecast to grow by around 2.1 mb/d. In 2025, global oil demand is expected to see robust growth of 1.8 mb/d, y-o-y, also unchanged from the previous month’s assessment. The OECD oil demand is expected to grow by
0.1 mb/d, y-o-y, while the non-OECD demand is forecast to expand by 1.7 mb/d.” the report read.

Monetary policies impact on oil market

In developed economies, inflation is easing but remains above target. The US CPI is at 3.3 per cent – yet above the Federal Reserve’s 2 per cent target – and the Eurozone’s is at 2.5 per cent. Meanwhile, inflation trends in developing countries diverge, with China at 0.3 per cent and India at 4.7 per cent.

Central banks are cautiously adjusting monetary policy. The European Central Bank (ECB) cut rates slightly, but the Fed and Bank of England held steady. This cautiousness is due to factors beyond just inflation, like currency vulnerabilities and business cycles. The Fed’s decisions hold particular weight due to the dominance of the US dollar in global trade.

The Fed’s wait-and-see approach presents challenges for the oil market. High interest rates in the US make oil exploration and production less attractive. Additionally, a strong USD (due to maintained rates) drives up commodity prices, including oil. This could limit other economies’ ability to ease policy without weakening their currencies relative to the USD.

“The Fed’s current cautious approach presents a key challenge for the global oil market on two major fronts: the oil supply side and the strength of the US dollar (USD).”

Global Economies

Furthermore, economic growth forecasts for 2024 show global expansion at 2.9 per cent, with the US at 2.2 per cent, Eurozone at 0.7 per cent, Japan at 0.3 per cent, China at 4.9 per cent, India at 6.6 per cent, Brazil at 1.8 per cent, and Russia at 3.1 per cent.

Attribution: OPEC+ monthly report