OPEC Report: Concerns Over Oil Demand Impact Prices Amid Predicted Slowdown in 2024

In its latest monthly report, the Organization of the Petroleum Exporting Countries (OPEC) identified exaggerated concerns over oil demand as a key factor contributing to high volatility and significant sell-offs in futures prices during November. This period saw Brent crude, the international benchmark, decrease by 7% in November and over 20% from its peak in September.

The report highlighted the role of speculators in this trend, noting a sharp reduction in bullish positions and an increase in short positions. These actions, driven by concerns over oil demand growth, have adversely affected market sentiment.

Throughout the year, analysts have expressed concerns about “demand destruction” in oil markets, citing factors such as high summer prices, depreciating currencies, and rising borrowing costs, which have dampened fuel consumption.

Despite these challenges, OPEC has maintained its forecast for global oil demand growth at 2.46 million barrels per day for 2023. However, the organization anticipates a slowdown in demand growth to 2.25 million barrels per day in 2024. This outlook is more optimistic than other forecasts, such as the International Energy Agency’s prediction of demand growth dropping to 930,000 barrels per day in 2024, and Fitch Ratings’ suggestion that slower economic growth could lead to an excess in oil supply.

OPEC attributes strong economic growth as a primary factor for sustained high oil demand, revising its 2023 global growth forecast to 2.9% while maintaining its 2024 forecast at 2.6%.

On the supply side, OPEC’s projections remain consistent. The organization expects non-OPEC supply growth of 1.8 million barrels per day in 2023 and 1.4 million barrels per day in 2024, with U.S. production leading in both years.

Throughout 2023, OPEC members have reduced their crude output in an attempt to stabilize prices. However, robust U.S. production, along with indications from Saudi Arabia and Russia of potential further supply cuts in the coming year, have not significantly influenced crude prices.

As 2023 nears its end, OPEC expresses a cautious optimism regarding the key factors influencing oil market dynamics in 2024.

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