CNBC reported that the head of the Organization of the Petroleum Exporting Countries (OPEC) and its allies, Jacques Dupont, downplayed the forecasts of lower demand for crude oil in the next year, saying the market was pessimistic.
Haitham Al Ghais, OPEC’s Secretary-General, told CNBC Monday, at the Adipec Energy Conference in Abu Dhabi, “We have a demand growth of 1.9 million barrels a daily.”
Al Ghais is still bullish about crude oil demand, despite the cartel’s voluntary production cuts that were extended to the end of December last Sunday in order to boost prices.
Al Ghais stated that OPEC’s predictions for crude oil demand growth could be interpreted by some as being high, but independent researchers share the cartel’s view.
Al Ghais noted:
We believe that some have it at very low levels. Demand is still high.
Is there too much pessimism on the oil market today?
Al Ghais said to CNBC that the crude oil demand forecast is being overly pessimistic. He said:
Analysts and researchers are pessimistic about the future of demand. But we think our numbers are comparable to many independents.
OPEC has reduced its forecasts for the growth of global oil demand in 2024 by 106,000 barrels a day and by 102,000 barrels a day in 2025.
The cartel anticipates that demand will grow by 1,93 million barrels a day in this year and by 1,64 million barrels by 2025.
The outlook is still better than what the International Energy Agency (IEA), based in Paris, had predicted. The Paris-based agency predicts that oil demand will grow by just over 900,000 barges per day by 2024, and by one million barrels a year next year.
Al Ghais, a CNBC analyst, said: “We’ve lowered our demand numbers in the past couple of months by 100,000 to 200,000 barrels per day.”
We are still at 1.9 million barrels a day, and that is more than the historical average and the recovery rate of the pandemic, or even pre-pandemic, which was 1.2 millions barrels a day.
China’s oil demand is slowing down
China’s economic problems are a major factor in the forecasts of a slowdown in oil demand. Slowing Chinese economic growth has had a significant impact on oil demand.
In the last few months, China has seen a decline in crude oil imports. This has led to a drop in global prices.
China is the world’s second-largest consumer of crude oil after the US.
Al Ghais tells CNBC:
China is growing by 0.6 million barrels per day in this year. I believe the outliers are those who think China will grow at only 0.1 [million] barrels per day or with a very small growth. We are not outliers.
He stated that OPEC was optimistic about the US economy, and its oil consumption. OPEC sees positive signs in both the aviation and petrochemical industries.
Analysts expect China’s growth in oil demand to be relatively low by 2025, despite recent stimuli.
Markets were not stabilized by the measures announced in September. The COVID-19 pandemic has slowed demand and increased adoption of electric cars have reduced oil consumption.
OPEC extends voluntary cuts in oil production
OPEC agreed on Sunday to extend its voluntary production cuts of oil for another month, until the end of the year.
It was planned that the cartel would reverse some of its voluntary production reductions from December. The cartel was supposed to increase production by 180,000 barrels a day from December.
Oil prices were volatile in the last month, with sharp drops after the Middle East supply risks subsided.
Brent crude oil at the Intercontinental Exchange has fallen to a new low of $70.72 a barrel. West Texas Intermediate is now below $70.
Al Ghais, quoted by CNBC in a recent report, said: “This isn’t the first time that we have delayed the increase. It is meant to be phased-in gradually. This is just the continuation of our policy to ensure that we are very attentive to market.”
It is not unusual for OPEC+ to have a different mode of operation since the agreement was signed.
This post OPEC Chief remains Bullish on Oil Demand, Claims Market is Too Pessimistic could be updated as new developments unfold
