OPEC does not fail to be optimistic about petroleum

In the latest monthly report on the petroleum market, OPEC stuck to its forecast of relatively strong growth in global petroleum demand in 2024 and, in a surprising preliminary assessment, announced that petroleum consumption will increase significantly in 2025.

OPEC's prediction of the outlook for the petroleum market in 2025 is in line with its view that petroleum consumption will continue to grow in the next two decades, and is contrary to the view of agencies such as the International Energy Agency that had predicted that the demand for petroleum by 2030 would reach its peak as the world moves towards cleaner energy.

OPEC announced in its monthly report that global demand for petroleum will increase by 1.85 million barrels per day in 2025 and reach 106.21 million barrels per day. For 2024, the group forecasts demand growth of 2.25 million barrels per day, unchanged from last month's report.

However, petroleum prices began with a weak performance in 2024 due to uncertainty in the market over the state of demand, which has affected new OPEC+ production cuts.

The 2025 forecast was published on the same day that OPEC Secretary-General Haitham Al-Ghais published an article in which, while contradicting estimates that demand for petroleum is nearing its peak, he repeated the group’s request to continue investing in the petroleum industry. The Secretary General of OPEC wrote: “What is clear is that peak oil demand is not showing up in any reliable and robust short- and medium-term forecasts. It is a challenge to see peak oil demand by the end of the decade, a mere six years away.”

The 2025 forecast is OPEC's first forecast in its monthly report, and based on the group's previous practice, it was expected to be published in July 2024. OPEC said it released the forecast earlier than usual to provide long-term guidance to the market.

For 2025, OPEC forecasts that global economic growth will increase to 2.8 percent, compared to 2.6 percent this year, partly due to lower interest rates. OPEC noted that China, the Middle East and India will drive the increase in petroleum consumption.

For this year, OPEC expects petroleum demand to grow much higher than the 1.1 million barrels per day growth forecast by the International Energy Agency.

The International Energy Agency, which represents industrialized countries, is scheduled to release its latest forecasts on Thursday. Global petroleum demand growth will halve in 2024 as a result of lower-than-usual economic growth in major economies, improved productivity and a boom in electric vehicle fleets, according to the agency.

Apart from their different views on demand, OPEC and the International Energy Agency also disagree on the need to invest in new petroleum supply. The International Energy Agency says the end of the fossil fuel boom makes the case for increased investment less compelling.

OPEC and its allies in OPEC+ have implemented a series of production cuts to support the petroleum market since late 2022. The new reduction in OPEC+ production started in January, but the OPEC monthly report showed that the group's petroleum production increased slightly in December and reached 26.70 million barrels per day with an increase of 73,000 barrels per day.

OPEC revised its production figures to reflect Angola's withdrawal from the group, which was announced by this African country last month. According to the OPEC report, until December, the group's petroleum production accounted for 26.5% of the global petroleum market.

According to Reuters calculations based on OPEC figures, the group's market share has fallen from 33 percent in 2017 as a result of successive production cuts and the exit of some members, despite the joining of several other small producers.

According to the Reuters report, however, OPEC representatives have downplayed the issue of declining market share, citing the group's view that non-OPEC supply growth will slow and OPEC members' market share will improve over time.