Oil demand uncertainty is creating significant challenges for OPEC+ as they plan to increase supply in October 2024. Analysts fear the market might struggle to absorb the additional supply due to weak demand, particularly in China. Economic growth in China has been slower than expected, leading to reduced crude imports and lower gasoline and diesel consumption. This oil demand uncertainty, along with fears of a U.S. recession, casts doubt on the global oil market.
During the latest OPEC+ meeting, officials confirmed their plan to increase supply in the fourth quarter but acknowledged that this could change if market conditions worsen. The International Energy Agency (IEA) expects slower demand growth than OPEC, which anticipates a 2.2 million barrels per day (bpd) increase in global demand for 2024. However, recent data suggests that OPEC’s forecast may be too optimistic.
Saudi Aramco, the world’s largest oil producer, shares OPEC’s outlook, predicting a demand increase of 1.6 to 2 million bpd in the year’s second half. However, with demand currently lagging behind these forecasts, OPEC+ may need to rethink their supply strategy. A misstep could destabilize the market with an oversupply, putting downward pressure on oil prices.
Analysts highlight that the success of OPEC+’s plans hinges on a strong recovery in global demand. If demand remains weak, OPEC+ might delay or even reverse its decision to increase supply. Such a move could have significant consequences for global oil prices, leading to increased market volatility.
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