On October 14, the Organization of the Petroleum Exporting Countries (OPEC) announced a downward revision of its oil demand growth expectations for this year and next, marking the third consecutive month of adjustments. This reflects OPEC’s acknowledgment that oil demand is likely to weaken.
In its latest monthly report, OPEC projected an increase of 1.93 million barrels per day in oil demand for this year, a revision down from last month’s estimate of 2.03 million barrels. The forecast for 2025 was also reduced, from a predicted increase of 1.74 million barrels per day to 1.64 million barrels.
OPEC noted that overall demand remains above the pre-COVID-19 pandemic average of 1.4 million barrels per day, maintaining healthy levels driven by strong air travel, road trips, and solid industrial, construction, and agricultural activity.
With this third consecutive cut to oil demand growth forecasts, it appears OPEC is reversing the bullish outlook it held at the beginning of the year. However, these estimates still exceed the expectations of Wall Street banks and traders significantly, landing at the upper end of the projections provided by Saudi Aramco, and are about double those given by the International Energy Agency (IEA).
Under the leadership of Saudi Arabia, OPEC plans to gradually restore a production capacity of 2.2 million barrels per day starting in December, a delay of two months from the original schedule. Nonetheless, institutions like JPMorgan and Citigroup remain skeptical about whether these plans will unfold as intended, particularly due to sluggish demand growth from China, a major consumer of crude oil, and the influx of large volumes of oil from the Americas.
On the same day, international oil prices plunged during trading, with West Texas Intermediate and Brent crude futures both declining around 2%, reversing gains from the previous week. This drop was attributed to Beijing’s failure to specify the scale of its stimulus plans, which left lingering concerns about China’s oil demand.
Market watchers are also closely monitoring how Israel will respond to missile attacks from Iran, fearing that the authorities in Tel Aviv might target oil infrastructure, further destabilizing the Middle East. However, thus far, geopolitical risks have had a relatively limited impact on oil prices, as the market has not faced substantial disruptions and OPEC has ample idle capacity.
