OPEC downgrades forecast for global oil demand growth

The Organization of the Petroleum Exporting Countries (OPEC) has downwardly revised its forecast for global oil demand growth over both the medium-term and long-term, citing tough market conditions and “signs of stress” in the world economy.

In its yearly World Oil Outlook (WOO), the oil-producing group said that the last 12 months had been challenging for energy markets once again.

“Signs of stress have appeared in the global economy, and the outlook for global growth, at least in the short- and medium-term, has been revised down repeatedly over the past year,” OPEC said.

As a result, OPEC has lowered its outlook numbers for global oil demand growth, to 104.8 million barrels per day (b/d) by 2024, and 110.6 million b/d by 2040.

The 14-member producer group said it expects oil demand to continue growing at “relatively healthy rates” over the next five years, predicting an increase of 6.1 million b/d when compared to the 2018 level.

The average growth will be about 1 million b/d over the medium-term period, OPEC said, with incremental demand likely to come primarily from non-OECD countries.

Already, the non-OPEC crude supply is expected to rise by 5.3mn b/d to 50.8mn b/d between this year and 2024, largely as US tight oil production continues to soar. Global demand will grow by 4.9mn b/d to 104.8mn b/d over the same period, with increases primarily from non-OECD countries and from the petrochemical sector.

Over the long-term, global oil demand is projected to climb by about 12 million b/d, rising from 98.7 million b/d in 2018 to 110.6 million b/d in 2040. India is thought to be the country with the fastest oil demand growth and the largest additional demand over the next two decades.

“At the global level, growth is forecast to slow from a level of 1.4 million b/d in 2018 to around 0.5 million b/d towards the end of the next decade,” OPEC said in the report.

The WOO presents the OPEC Secretariat’s medium-term and long-term analysis of the energy market, as well as projections for the global economy.

The report comes at a time when many energy market participants are increasingly concerned about a repeat of rising supply and faltering demand — the same situation that precipitated a dramatic fall in crude futures from mid-2014 to 2016.

Since October 2018, when Brent crude futures climbed to a peak of just over $86, the international benchmark has fallen nearly 30%. U.S. West Texas Intermediate has fallen almost 20% over the same period.

Brent crude traded at $62.31 a barrel on Tuesday morning, while U.S. WTI stood at $56.65.

“We are looking at a big increase in non-OPEC supply in the next few months, not just the United States — which is still continuing to grow — but we are seeing a big surge from Brazil and Norway and one or two other countries,” Neil Atkinson, head of the oil industry and markets division at the International Energy Agency (IEA), said.

“Meanwhile, growth in demand is slowing because of the poorer economic climate. So, we see a return to a major surplus at the beginning of next year.”

The IEA’s Atkinson said OPEC and allied non-OPEC members, sometimes referred to as OPEC+, would have to decide whether further production cuts would be necessary when it meets in early December.

He added the group would have to decide with the knowledge that the pressure on prices “is clearly going to be downwards rather than upwards.”

The OPEC’s WOO said oil accounted for more than 31% of global energy demand in 2018, ahead of coal (27%) and gas (23%).

And, over the next 20 years, oil is forecast to remain the largest contributor to the energy mix, accounting for more than 28%.

Natural gas was expected to become the second-largest energy source, according to OPEC, reaching a share of 25% in the total primary energy mix in 2040.

“Demand increases for gas will come primarily from Asia, led by China and India, as well as OPEC Member Countries,” the group said.

Last year, global carbon emissions climbed to a record high, despite a warning from a United Nations report that the output of the gases will have to be slashed over the next 12 years to stabilize the climate.