OIL MARKETS

PRODUCERS VOW TO KEEP GLOBAL OIL MARKET BALANCED

A meeting of top ministers from oil-producing nations in August maintained the current oil output policy, including plans to begin unwinding a layer of production cuts starting October, while reiterating that the increase could be paused or reversed if market conditions warrant it.

The Joint Ministerial Monitoring Committee (JMMC), which includes key ministers from the Organization of the Petroleum Exporting Countries (OPEC) and its allies, led by Russia, convened online recently to discuss the group's strategy.

OPEC+ is currently implementing production cuts totalling 5.86 million barrels per day (bpd), about 5.7% of global demand, as part of a series of measures introduced since 2022 to stabilise the market amid fluctuating global demand and rising output from non-member countries.

In a statement following the meeting, OPEC+ reaffrmed that the gradual phase-out of the most recent voluntary cuts – 2.2 million bpd until September – could be paused or reversed depending on market dynamics.

While still at elevated levels, oil prices have dropped from a 2024 high of over USD 92 a barrel in April to below USD 81, weighed down by concerns over demand strength. 

At its last meeting in June, OPEC+ agreed to phase out the 2.2 million bpd cut over the course of a year, from October 2024 to September 2025, and to extend earlier cuts of 3.66 million bpd until the end of 2025. Saudi Arabia’s energy minister Prince Abdulaziz bin Salman had indicated that OPEC+ could pause or reverse the production increases if the market's strength was insuffcient.

The latest meeting also highlighted commitments from Iraq, Kazakhstan, and Russia to fully adhere to their pledged output cuts, with assurances that these countries would compensate for past overproduction.

The JMMC typically meets every two months and can make recommendations to the broader OPEC+ group. The next meeting is scheduled for 2 October.

WORLDWIDE OIL CONSUMPTION

The global oil demand growth forecast for 2024 is 2.2 million bpd, according to the latest OPEC forecast. There were some downward adjustments for the first quarter due to actual data from Organisation for Economic Co-operation and Development (OECD) regions, but this was oset by a better-than-expected performance in the same quarter in some non-OECD countries.

Accordingly, the OECD is projected to expand by around 200,000 bpd in 2024, with OECD Americas leading the consumption growth, while OECD Europe and OECD Asia Pacific are expected to show marginal year-on-year (y-o-y) declines.

Expected strong mobility and air travel in the Northern Hemisphere during the summer driving/holiday season is anticipated to bolster demand for transportation fuels and drive growth in the United States.

In addition, expected improvements in manufacturing and petrochemical activities are seen supporting the demand for LPG/NGL, lending additional lift to oil consumption in the country. Oil demand in Europe and the Asia Pacific region is also expected to pick up somewhat between the second quarter and fourth quarter, amid stronger mobility and improving economic development.

In the non-OECD, y-o-y oil demand is forecast to expand by around 2.1 million bpd, driven mostly by China as well as Other Asia, the Middle East, India, and Latin America. Total world oil demand is anticipated toreach 104.5 million bpd in 2024, bolstered by strong demand for air travel and healthy road mobility, including trucking.

Support is also expected from industrial, construction and agricultural activities in non-OECD countries.

Similarly, petrochemical capacity additions in non-OECD countries – mostly in China and the Middle East – are expected to contribute to oil demand growth.

The current positive momentum for oil demand in the first quarter in the non-OECD region, supported by robust economic activity and healthy mobility and air travel, is expected to continue for the rest of the year. This growth is mostly supported by demand for distillates and transportation fuels in China, the Middle East, India, and Other Asia. However, this forecast is subject to some uncertainty, including global economic developments in key economies of the region. 

In 2025, global oil demand is forecast to show robust y-o-y growth of 1.8 million bpd, unchanged from the previous month’s assessment. The OECD is expected to grow by 0.1 million bpd, y-o-y, while demand in the non-OECD is forecast to expand by a healthy 1.7 million bpd.