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Published: July 5, 2023
Updated: July 5, 2023

OPEC Remains Optimistic about Oil Demand Outlook for Next Year, Anticipates Modest Slowdown

Despite an expected slowdown, OPEC maintains an optimistic view on the growth of oil demand for the upcoming year. Sources close to OPEC indicate that the organisation will release its first outlook later this month, projecting a slightly lower increase compared to the unusually high rate experienced this year as the world recovered from the COVID-19 pandemic. Although below this year's growth, the forecast for 2024 is expected to surpass the annual average of the past decade, except for the pandemic years.

Steady Growth Expected for 2024:

OPEC's forecast for 2024 is likely to show a slower pace of expansion compared to the current year. However, it is expected to exceed predictions by the International Energy Agency (IEA), which foresees a significant deceleration in demand growth to 860,000 barrels per day (bpd) for the following year. OPEC and the IEA have had disagreements in recent years, with OPEC criticizing the IEA for what it perceives as unreliable predictions and subsequent data revisions.

Oil Demand Growth and its Significance:

Oil demand growth serves as an essential indicator of market strength and significantly influences policy decisions made by OPEC and its allies, collectively known as OPEC+. Concerns about weakening demand and its impact on prices led the group to extend supply curbs into 2024. While growth is expected to slow in 2024, OPEC sources believe it will not be as severe as the IEA's forecast, projecting a range of above 1 million bpd but likely below 2 million bpd.

OPEC's Demand Forecast for 2023:

OPEC is set to publish its first demand forecast for 2023 in its upcoming monthly report on July 13. Industry insiders anticipate that OPEC's projection will be more optimistic than that of the IEA, reflecting a more bullish stance on future demand for oil. During a recent conference, top officials from OPEC countries expressed optimism regarding the oil demand outlook, citing growth in Asia, particularly China and India, as contributing factors.

Factors Influencing Forecasts:

Oil demand forecasts are subject to substantial revisions due to changes in economic outlooks and geopolitical uncertainties. This year, factors such as China lifting coronavirus lockdowns and rising interest rates have played a role in adjusting projections. OPEC itself revised its initial demand growth forecast for 2023, originally estimating 2.7 million bpd in July 2022, before revising it downward to 2.35 million bpd.

OPEC maintains a positive outlook on oil demand growth for the upcoming year, expecting a modest slowdown compared to the unusually high rates experienced during the recovery from the COVID-19 pandemic. While OPEC's forecast for 2024 is anticipated to be lower than this year's growth, it is still expected to surpass the annual average of the past decade, excluding pandemic years. OPEC's perspective differs from the IEA's projections, reflecting ongoing disagreements between the two organizations. The upcoming release of OPEC's demand forecast for 2023 is eagerly awaited, with industry insiders anticipating a more bullish outlook compared to the IEA's forecast.