(+) OPEC- Demand Outlook, Overproduction and Tapering

OPEC in its August Monthly Oil Market Report lower its demand outlook to 104.3 million bpd for 2024. That is a projected growth decrease of 135 kbpd, but OPEC demand growth expectation at 2.1 million bpd is still healthy number north of market consensus. The OPEC downward revision of demand growth is the first cut from OPECs growth estimates since its release over a year ago. The earlier estimates were a significant growth in global demand of 2.25 million bpd, but due to the major, global growth engine Chinas outlook the numbers were adjusted down. We still have a substantial spread in this year’s demand growth between the two outliers, IEA at 970 kbpd versus OPECs new estimates at 2.1 million bpd with the market consensus somewhere in between the two agencies.

At the same time OPEC adjusted down their 2025 growth estimates by 65 Kbpd to 1.8 million bpd. IEA also made some minor adjustments for their 2025 estimates with a decrease of 30 Kbpd to new growth estimates at 950 Kbpd. The gap between the two agencies for 2025 remains wide as OPEC expect almost twice the growth compared with IEA.

Despite traders and analysts growing concern in regards of Chinese demand, OPEC remains optimistic about Chinese demand growth and in particular Chinese manufacturing sector, petrochemical feedstock demand growth and jet fuel demand due to travel activities.

Compliance Slips.

Russia, Kazakhstan and Iraq failed to comply with their production quotas in the first half of the year and to keep the discipline in the group the overproducer must compensate for excess output earlier. As part of the compensation cut plan approved last month Iraq was to cut an additional 70 Kbpd in July and Kazakhstan was supposed to cut 18 kbpd as a compensation for overproduction. Russia, OPECs top producer also failed to produce within the target, exceeding it with 250- 300 kbpd. Russian export declined by 130 kbpd to 4.76 million bpd, refining throughput increased by 240 kbpd to 5.46 million bpd. Approximately 1 million bpd of exports and refining runs include condensate which is subtracted from the quotas as the OPEC+ agreement does not cover condensate. Russia has said they will compensate for the overproduction between April and September 2025. Kazakhstan is expected to compensate for overproduction in August when the 650 kbpd Tengiz field enters annual maintenance.

Tapering.

In June OPEC+ announced their plan to gradually bring barrels from the 2.2 million bpd voluntary cuts* back in the market starting in October. The cartel said they will gradually bring the 2.2 million bpd into the market during a 12-month period. If all goes according to plan this means an additional 182 kbpd per month in the market.

With the new OPEC outlook and peak demand season nearing an end, it`s less than likely the cartel will bring more oil back into the market. We think its likely OPEC+ will extend its voluntary cuts unless prices stabilize above $90. With Q4 seasonal weakness, weaker signals from China and lower than expected prices to consider we believe OPEC+ will extend the voluntary cuts.

The nine-member voluntary cut of 1.66 million bpd extended through end of 2025, the same with the collective group cut of 2 million bpd. Total OPEC+ spare capacity 5.86 million bpd.

*8 OPEC+ countries part in the 2.2 million bpd cut: Saudi Arabia (1 million bpd), Russia (500 kbpd) Iraq (223 kbpd), United Arab Emirates (163 kbpd), Kuwait (135 kbpd), Kazakhstan (82 kbpd), Algeria (51 kbpd) and Oman (42 kbpd)

Disclaimer

This report is under no circumstances intended to be used for or considered as investment advice. This report is to be used as information and a general market guidance. The author, GE Briefings and Investornytt cannot guarantee that the information from sources is without incentives, but the author has taken considerable care to ensure that, and to the best of his knowledge, material information contained in the report is in accordance with the facts and contains no omission likely to affect its understanding. Please note that this report is the authors own research, opinions and conclusions, and the readers is recommended to draw their own conclusions based on other sources than this report, the facts and market picture can change in an instant and therefor the reader must do their own due diligence. The author, GE Briefings and Investornyttcannot be held responsible for the readers investments based on this report.

(+) OPEC- Demand Outlook, Overproduction and Tapering

OPEC in its August Monthly Oil Market Report lower its demand outlook to 104.3 million bpd for 2024. That is a projected growth decrease of 135 kbpd, but OPEC demand growth expectation at 2.1 million bpd is still healthy number north of market consensus.

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(+) OPEC- Demand Outlook, Overproduction and Tapering

OPEC in its August Monthly Oil Market Report lower its demand outlook to 104.3 million bpd for 2024. That is a projected growth decrease of 135 kbpd, but OPEC demand growth expectation at 2.1 million bpd is still healthy number north of market consensus.

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