OPEC has raised its annual outlook for global oil demand in the medium and long term, projecting that $14 trillion in investments will be needed to meet this demand, even with the growth of renewable fuels and the increasing number of electric cars.
The perspective of the Organization of the Petroleum Exporting Countries (OPEC), as outlined in its “World Oil Outlook for 2023” released yesterday, contrasts with that of other analysts, including the International Energy Agency (IEA), which suggests that demand may peak in this decade.
Another decade of rising consumption would be a boost for OPEC, whose 13 members rely on oil revenues. The group asserts that oil should be a part of the energy transition and discourages decisions by some governments and companies to slow down the phase-out of fossil fuels.
“Recent developments have led the OPEC team to reevaluate what each energy source can offer, with a focus on practical and realistic options and solutions,” wrote OPEC Secretary-General Haitham Al Ghais in the report’s preface.
“Calls to halt investments in new oil projects are misguided and could lead to energy and economic chaos,” he added, estimating that the necessary investment in the oil sector would be $14 trillion by 2045, up from the $12.1 trillion estimated last year.
OPEC expects global oil demand to reach 116 million barrels per day (bpd) by 2045, approximately six million bpd higher than the previous year’s report, with growth driven by China, India, other Asian nations, as well as Africa and the Middle East.
The executive director of the IEA, Fatih Birol, stated last week that global coal, oil, and natural gas consumption could peak before 2030. The IEA advises industrialized countries to halt new investments in oil if the world aims to achieve net-zero emissions by mid-century.
Middle East Influences Rising Prices
Oil prices rose by over 4.00 percent yesterday as military clashes between Israel and the Palestinian Islamic group Hamas raised fears of a broader conflict in the Middle East.
Brent (the benchmark for Angolan sales) rose by $3.57, or 4.2 percent, closing at $88.15 per barrel, while the price of West Texas Intermediate (WTI) crude oil closed at $86.38 per barrel, a 3.59 dollar increase or 4.3 percent.
Both benchmark oils rose by more than four dollars per barrel at the start of the session, according to Reuters, which noted that these increases reversed last week’s downward trend (the largest weekly decline since March), when Brent dropped by around 11 percent and WTI fell by over 8.00 percent, as a gloomy macroeconomic outlook intensified concerns about global demand.
While the supply and demand balance remains unaffected, said PMV broker analyst Tamas Varga, “any escalation of tension in the Middle East typically leads to higher oil prices, and this time is no different.”
On Saturday, Hamas launched the largest military attack against Israel in decades, triggering a wave of Israeli airstrikes on Gaza, an eruption that threatens to derail efforts to reconcile Saudi Arabia and Israel.
There are fears that the conflict could involve Iran, which, if it happens, could jeopardize up to 3.00 percent of global oil supply, and there are also concerns about a broader conflict that could disrupt traffic through the Strait of Hormuz, where around 20 percent of supplies could be affected by the clashes.
