SEATTLE (Oil Monster): A key difference in crude oil demand forecasts between this year and 2024 is that both OPEC and the International Energy Agency (IEA) are being far more cautious in their growth expectations.
While the Organization of the Petroleum Exporting Countries (OPEC) and the wider OPEC+ group publicly maintain that strong demand and a tight market justify increasing oil output, the numbers in their monthly report are more circumspect.
It is largely the same for the IEA, which forecast in its July monthly report that global crude demand will grow by 700,000 barrels per day (bpd) in 2025, the slowest pace since 2009.
OPEC's July report is slightly more bullish, forecasting oil demand will increase by 1.29 million bpd in 2025, with 1.16 million bpd coming from countries outside the developed economies of the Organisation for Economic Cooperation and Development (OECD).
The forecasts from both the IEA and OPEC are now so cautious that they actually run the risk of being too pessimistic, especially in the top-importing region of Asia.
This is in stark contrast to last year, when OPEC in particular was massively bullish in its demand forecasts even as Asia's crude oil imports were declining.
There is, of course, a difference between demand forecasts and imports, but the level of seaborne imports is the key driver of crude prices, given it is this market, which accounts for about 40% of global daily oil demand, that sets the global prices.
In its July 2024 monthly report OPEC forecast that Asia's non-OECD oil demand would rise by 1.34 million bpd in 2024, with China accounting for 760,000 bpd of this.
However, Asia's crude imports actually declined in 2024, dropping by 370,000 bpd to 26.51 million bpd, according to data compiled by LSEG Oil Research.
It was the first decline in Asia's oil imports since 2021, at a time when demand was hit by the lockdowns prompted by the COVID-19 pandemic.
The gap between OPEC's bullish forecasts for much of 2024 and the reality of weak crude imports by Asia may have tempered the exporter group's forecasts for 2025.
The question is whether they are now actually being too cautious.
Courtesy: www.reuters.com
