On Tuesday 12th September, 2023, OPEC maintained its predictions of robust global oil demand growth for 2023 and 2024, citing signs that major economies are performing better than expected despite adverse conditions such as high interest rates and elevated inflation.
The headquarters of the Organization of the Petroleum Exporting Countries in Vienna
Global oil demand is set to increase by 2.25 million barrels per day (bpd) in 2024, compared to the growth of 2.44 million bpd in 2023, as stated by the Organization of the Petroleum Exporting Countries (OPEC) in its monthly report released yesterday. Both forecasts remained unchanged from the previous month.
The lifting of pandemic-related lockdowns in China helped boost oil demand in 2023, leading OPEC to maintain a relatively optimistic outlook for 2024, predicting higher demand growth compared to other analysts, such as the International Energy Agency.
“The ongoing global economic growth is expected to drive oil demand, especially with the recovery in tourism, air travel, and constant mobility,” said OPEC in the report. “Pre-Covid-19 levels of global total oil demand are expected to be surpassed in 2023,” the document anticipates.
Oil demand collapsed in 2020, leading to some predictions of an early peak in worldwide oil usage. OPEC has insisted on the forecast of recovery, projecting an average demand of 102.1 million bpd in 2023, surpassing pre-pandemic levels in 2019.
OPEC and its allies, known as OPEC+, began limiting supply in 2022 to bolster the market. Brent, the benchmark for Angolan sales, surpassed $90 per barrel last week for the first time in 2023 after Saudi Arabia and Russia extended voluntary cuts until the end of the year.
Resilient Economy
OPEC maintained its forecast for global economic growth this year at 2.7 percent and 2.6 percent for the next year, considering what it deems a resilient first half and a consistent global growth trend that continued into the third quarter.
“Emerging countries in Asia, especially India, Brazil, and Russia, may pleasantly surprise even more,” predicts OPEC, adding that “if the United States continues to maintain its current momentum, growth may turn out higher than expected.”
The OPEC report also shows that oil production from OPEC increased in August, driven by a recovery in Iran’s production, despite U.S. sanctions remaining in effect on Tehran’s voluntary cuts and an increase in Nigeria’s production.
OPEC production increased by 113,000 bpd in August, reaching 27.45 million bpd, which attributed much of the production increase last month to Iran.
Iran is exempt from OPEC and OPEC+ production cuts due to sanctions, and Nigeria faced internal challenges that limited production.
Commodities
Crude oil prices rose about 1.00 percent yesterday the 12th of September 2023, driven by a perspective of tighter supply and OPEC statements indicating that major economies are performing better than expected, despite rising interest rates.
Futures prices for Brent (the benchmark for Angolan sales) for November rose 85 cents or 0.9 percent to $91.49 per barrel at 1:19 PM (Angolan time), while U.S. West Texas Intermediate for October rose $1.02 or 1.2 percent to $88.31.
Brent surpassed $90 per barrel last week for the first time in 10 months after Saudi Arabia and Russia announced they would extend voluntary supply cuts totaling 1.3 million barrels per day (bpd) until the end of the year.
There is no doubt that the oil industry anticipates a collective recovery risk with the perception and the actual tightening in parts of the oil flow.
In addition to the optimistic forecasts from the Organization of the Petroleum Exporting Countries (OPEC) regarding demand growth for this year and the next, released yesterday, prices are influenced by the expectation that the August data of the U.S. Consumer Price Index, today, will provide clues about U.S. interest rates.
