OPEC's Oil Demand Forecast as of Dec 15

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From ZACKS: OPEC Sees Strong Demand Growth for Oil in 2024: Here's Why

Nilanjan Choudhury
Fri, December 15, 2023 at 7:26 AM CST

Despite recent challenges, the oil-producing group OPEC remains optimistic about the future of the market. In its December Oil Market Report, the organization highlighted the strong demand for crude oil, expecting it to be higher than the increase in oil supply from non-OPEC sources. This positive view persists even though oil prices recently went down, a drop that OPEC blames on speculators and their "exaggerated concerns."

Considering OPEC’s resilient demand expectations, we believe that oil’s current levels of just over $70 allows long-term-oriented market participants to buy shares in quality companies at attractive prices. Investors interested in the sector could benefit from having stocks like Murphy USA MUSA, EOG Resources EOG and Liberty Energy LBRT in their portfolio.

OPEC's Conviction Powered by Robust Fundamentals

OPEC is sure about the demand for its own crude oil, estimating that it will need to churn out an average of 29.68 million barrels per day (b/d) in the first quarter of 2024. This is much more than the 27.84 million b/d it produced in November. To address worries in the market, OPEC members and their allies, like Russia, have decided to make deeper cuts in production by 700,000 b/d. This strategic move aims to counter the negative feelings in the market and make global oil supply even tighter.

OPEC's confidence is backed by the overall global economy. Notwithstanding certain issues, it notes that the economy grew more than expected in the first three quarters of 2023. The prospect of accommodative monetary policies and improved geopolitical conditions adds to the positive outlook. OPEC points out key factors driving demand, such as strong global GDP growth, better economic conditions in China, and growth in OECD Americas.

Recognizing Economic Challenges & Non-OPEC Supply Growth

Challenges are still present, with the risk of economic downturns in major consumer countries and difficulties in China's demand for oil. However, OPEC believes that the recent drop in oil prices is due to speculators. They say that "exaggerated concerns about oil demand growth" have made the market feel less positive. This shows that OPEC thinks the market changes are more because of speculation than real changes in how much oil is available and needed.

OPEC recognizes that more oil is being produced outside their group. They keep their prediction for how much this non-OPEC production will grow: 1.8 million b/d in 2023 and 1.4 million b/d in 2024. The United States is expected to play a big part in this increase, with American liquids production going up by 1.3 million b/d in 2023. Other countries adding to the growth include Brazil, Kazakhstan, Norway, Guyana, Mexico and China. < On Dec 13th EIA reported a decline in U.S. oil production from 13.2 to 13.1 million bpd. My guess is that U.S. oil production will fall below 13.0 million bpd in the 1st quarter due to weather related issues. Lot's of upstream companies put off well completions during the winter.

What Lies Ahead?

OPEC's report for December keeps its prediction of a 2.25 million b/d growth in oil demand for 2024. The organization is cautiously hopeful about the market in 2024, noting strong global economic growth and positive economic activities. Even with the recent fall in oil prices, OPEC sticks to its forecast, highlighting the need to understand the difference between short-term changes in the market and the long-term demand for oil.