SlavkoSereda/iStock via Getty Images
OPEC announced its decision to maintain expectations for global oil demand growth, yet revised its economic forecast due to signs of inflation easing and projected interest rate cuts in the latter half of this year according to its latest monthly report released on Tuesday.
OPEC’s Oil Demand and Economic Forecast
The cartel projects that oil demand will increase by 2.25 million barrels per day this year, aligning with its previous estimates. Furthermore, OPEC upholds its outlook for 2025 demand growth at 1.85 million barrels per day while raising its global economic growth forecast to 2.7% for this year and 2.9% in 2025. This is a notable increase from its previous forecast, which anticipated 2.6% growth in 2024 and 2.8% in 2025.
The group also lifted its estimates for U.S. economic growth to 1.6% in 2024 and 1.7% in 2025. However, it left the eurozone growth forecast unaffected at 0.5% for this year and 1.2% for the next.
Reduction in OPEC’s Crude Oil Production
OPEC reported a decline in its own crude oil production by 350,000 barrels per day to 26.3 million barrels per day in January, compared with December.
Positive Economic Revisions and Future Prospects
During the World Governments Summit in Dubai, OPEC Secretary-General Haitham Al Ghais expressed optimism about the global economy, particularly the United States. Al Ghais mentioned, “We are seeing positive signs of good revisions to some parts of the global economy, most notably the United States.” He dismissed concerns about peak oil demand, stating that it is a distant concept.
Al Ghais also highlighted OPEC’s enthusiasm for the Chinese and Indian markets, indicating “We still feel very robust” about China and foresee “phenomenal economic growth” in India.
Market and Economic Context
OPEC’s projection of oil demand growth contrasts with the International Energy Agency’s forecast of 1.24 million barrels per day expansion this year. The International Energy Agency is set to update its forecasts on Thursday.
The price of U.S. crude oil experienced an upward trend for the seventh consecutive session on Tuesday. The front-month Nymex contract for March concluded with a 1.2% increase at $77.87 per barrel, while front-month April Brent crude closed with a 0.9% rise at $82.77 per barrel.
Amidst a sharper-than-expected U.S. inflation reading for January and a strengthening dollar, crude oil prices surged while equities experienced a marked decline.
Exchange-Traded Funds (ETFs)
ETFs involved in these developments include NYSEARCA USO, BNO, UCO, SCO, USL, DBO, DRIP, GUSH, NRGU, and USOI.
