Global Oil Market in Balance: OPEC’s Latest Forecasts Amid Economic Shifts

© Reuters. Global Oil Market in Balance: OPEC’s Latest Forecasts Amid Economic Shifts

Quiver Quantitative – The Organization of the Petroleum Exporting Countries (OPEC) maintained its global oil-demand growth projections while raising its economic forecast for this year, buoyed by falling inflation and expected interest rate cuts. OPEC’s report, published from its headquarters in Vienna, reiterated its anticipation of oil demand growth of 2.2 million barrels per day in 2024 and 1.8 million barrels per day in 2025. This steady outlook on oil demand aligns with OPEC’s enhanced economic growth forecast for 2024, which has been revised upwards to 2.8% from 2.7%, driven by robust growth in major economies like China, India, and the United States. The group’s economic forecast for 2025 remains stable at 2.9%.

OPEC’s optimistic outlook is underpinned by expectations of a global economic upturn, facilitated by a general easing of inflation and subsequent rise in consumer spending capabilities. The group anticipates central banks to initiate interest rate cuts from the latter half of 2024, continuing into 2025, which is expected to further support economic growth. For the United States, OPEC has raised the economic growth forecast for this year to 1.9% from 1.6%, holding the 2025 forecast at 1.7%. The Eurozone’s growth forecast remains steady at 0.5% for this year and 1.2% for the next.

Market Overview:
-Unchanged Oil Demand View: OPEC remains confident in oil demand growth, despite a range-bound oil market.
-Upward Economic Revision: The cartel raised its 2024 global economic growth forecast to 2.8%, citing optimism in major economies.
-Central Bank Policy Shift: OPEC anticipates central banks to begin lowering interest rates in the second half of 2024.
-Production Increase: Despite OPEC+ production cuts, overall output rose due to higher Libyan and Nigerian production.

Key Points:
-Steady Oil Demand Outlook: OPEC maintains its 2.2 mbpd and 1.8 mbpd growth projections for 2024 and 2025, respectively.
-Revised Economic Forecast: The cartel upgraded its 2024 global economic growth forecast to 2.8% on expectations of lower inflation and potential interest rate cuts.
-Anticipated Rate Cuts: Central banks are expected to loosen monetary policy starting in the second half of 2024, according to OPEC.
-OPEC+ Production Uptick: Despite cuts by Saudi Arabia and others, rising Libyan and Nigerian output boosted overall OPEC production in February.
-Focus on June Meeting: The decision on OPEC+ production policy for the second half of 2024 hinges on their June ministerial meeting.

Looking Ahead:
-The oil market remains balanced between worries about China and U.S. monetary policy against tight physical markets and geopolitical tensions.
-The International Energy Agency (IEA) releases its monthly report on Thursday, offering further insights into the oil market outlook.

Amid these forecasts, futures are trading within a narrow range, influenced by mixed market forces including concerns over Chinese demand and U.S. interest rate trajectories, balanced against indications of market tightness, OPEC+ output curbs, and geopolitical risks in the Middle East. currently hovers around $82 per barrel, while WTI, the U.S. benchmark, is around $78 per barrel. Despite ongoing production cuts by key OPEC members, the cartel’s overall crude oil production increased in February, primarily due to higher outputs from Libya and Nigeria. Libya’s oil production rose significantly, alongside a notable increase from Nigeria and a smaller rise from Saudi Arabia.

Looking forward, OPEC and its allies have agreed to extend voluntary output cuts into the second quarter of 2024 to prevent a global surplus and bolster prices. Decisions on policy for the second half of the year are expected at a ministerial meeting in June. Meanwhile, the group has revised its non-OPEC supply growth forecast downward for 2024, citing substantial reductions in Russian and Mexican supply. However, supply growth expectations for 2025 have been adjusted upwards. The upcoming monthly report from the International Energy Agency will provide further insights into the global energy market’s dynamics.

This article was originally published on Quiver Quantitative