OPEC's forecast for global demand growth in the next two years remains unchanged from last month. Its data shows that countries with poor compliance with production cuts are still overproducing.
OPEC on Wednesday maintained its forecast for relatively strong growth in global oil demand for this and next year, saying that economic growth and recovering air travel will support summer fuel consumption. The organization said in a monthly report that global oil demand is expected to increase by 2.25 million barrels per day in 2024 and 1.85 million barrels per day in 2025, which is unchanged from the previous month.
In the report, OPEC said, "It is expected that traffic and air travel in the Northern Hemisphere will be very busy during the summer travel season, which will promote the demand for transportation fuel and drive up U.S. fuel consumption." Experts' predictions of this year's and mid-term oil demand growth are more divergent than usual, in part because of differences in the pace of global transition to cleaner fuels. OPEC's demand expectations are at the high end of the industry, but it has not predicted when demand will reach its peak.
OPEC's report also predicts oil supply gaps in the coming months and 2025, which are larger than the U.S. Energy Information Agency's forecast on Tuesday. The OPEC report also predicts that demand for OPEC+ crude oil in the third quarter will be 43.6 million barrels per day, far higher than the alliance's current output.
"The strength of economic growth in the first half of the major economies remains strong, and this trend supports the recent generally positive growth trajectory," OPEC said.
Earlier this Wednesday, BP released its annual Energy Outlook, stating that under its two main scenarios, demand will peak next year.
The International Energy Agency (IEA), which represents industrialized countries, expects demand growth in 2024 to be much lower than OPEC's, at only 0.96 million barrels per day, and will provide its latest views on Thursday.
"It is expected that traffic and air travel in the Northern Hemisphere will be very busy during the summer travel season, which will promote the demand for transportation fuel and drive up U.S. fuel consumption."
OPEC's report also predicts oil supply gaps in the coming months and 2025, which are larger than the U.S. Energy Information Agency's forecast on Tuesday.
OPEC has also raised its forecast for global economic growth this year from 2.8% to 2.9%, and said there is potential for further upward revision as non-OECD growth continues to be strong.
OPEC said, "The resilience of the above-trend growth momentum seen in the first half of the major economies supports the recent generally positive growth trajectory."
Countries that have failed to implement production cuts are still producing in excess.
Because of its optimistic outlook on demand prospects, OPEC+ has agreed to gradually phased out the 2.2 million barrels-per-day voluntary production cut agreement starting in October. But before this, compliance with production quotas by member states is still uneven. The three main members of the alliance have not yet met their targets, let alone beginning additional compensatory production cuts.
OPEC+ data shows that the major members of the alliance, Iraq, Kazakhstan, and Russia, continue to exceed their production limits. According to its monthly report, although Russia made a significant production cut in June, the total supply of the three countries per day is still several hundred thousand barrels higher than the year's set quotas.
The report shows that Russia, co-led by Saudi Arabia in OPEC+, reduced its daily output by 0.114 million barrels last month to 9.139 million barrels, still 0.161 million barrels above its assigned quota. Russia is facing significant military spending in Ukraine.
Iraq's daily production fell by 0.025 million barrels to 4.189 million barrels, but was still 0.189 million barrels above its quota. While trying to rebuild its war-torn economy, Iraq often has issues with the production quotas of OPEC+.
Last month, OPEC+ proposed gradually restoring idle supplies from the fourth quarter, but emphasized that the plan was only temporary after the oil price crashed. The organization will hold a monitoring meeting on August 1.
As OPEC+'s supply restrictions help balance the crude oil market in response to a surge in supply from the United States and other parts of the Americas this year, Brent crude oil trading prices are approaching $85 per barrel. But according to the International Monetary Fund (IMF), this may still be too low for OPEC+ member countries, including Saudi Arabia, who need prices close to $100 per barrel to pay for their expensive government spending.