They won’t! The reality is that U.S. production capacity didn’t grow this year, and I don’t anticipate much room for a significant increase next year either. My colleagues at the IEA have generally been more accurate in these forecasts than OPEC, which projected more aggressive growth earlier this year, expecting global demand to increase by 2.2 to 2.3 million barrels per day, whereas the IEA estimated closer to 1.3 million. There’s often a sense that OPEC’s numbers may be less independent, given its institutional optimism for sustained strong demand. Meanwhile, the IEA forecasts peak demand by the end of the decade. After a robust 2023, largely driven by China’s post-COVID recovery, demand growth has slowed significantly this year to around 1 million barrels per day.
How do you think the divergence in forecasts for 2024 oil demand growth between the IEA, EIA and OPEC has impacted the oil markets this year?
It’s true that this divergence can affect market sentiment. Many, including myself, initially expected around 1.5 million barrels per day in demand growth. But as real data came in, it was clear that demand growth has been much slower. While OPEC has gradually revised its forecast down, it still sits at 1.8 million barrels per day. Investors do pay attention to these forecasts, particularly the IEA’s, due to its access to extensive data from non-OECD governments. However, they also form their own assessments, as seen with Goldman Sachs’
recent bullish outlook.
What do you think OPEC+ will decide regarding production levels for 2025, should they increase, maintain cuts, or reverse them?
I doubt there’s much room for OPEC+ to increase supply at the moment. Even if there were a push for more market share, putting additional oil into a market with low demand growth, coupled with rising production from non-OPEC countries like the U.S., Brazil, Guyana, and Canada, could risk driving prices well below $70 a barrel. OPEC+ may simply need to accept this current market reality, which I expect will continue into 2025.