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Opec boosts long-term oil demand outlook

Group has predicted strong energy demand growth of 24% globally between now and 2050

Opec raised world oil demand forecasts for the medium and long term, citing growth led by India, Africa and the Middle East and a slower shift to electric vehicles and cleaner fuels.

The Organissation of the Petroleum Exporting Countries, in its 2024 World Oil Outlook published on Tuesday, sees demand growing for a longer period than other forecasters like BP and the International Energy Agency, which expect oil use to peak this decade.

“Future energy demand is found in the developing world due to increasing populations, middle class and urbanisation,” said Opec Secretary-General Haitham Al Ghais during the report’s launch in Brazil, a country with which the group is seeking to form closer ties.

The bullish long-term demand outlook came as global benchmark Brent oil dropped below $70 a barrel in early September — its lowest in 33 months.

The oil producers’ group has predicted strong energy demand growth of 24 per cent globally between now and 2050. It also forecasts “robust medium-term growth” in oil demand reaching 112.3 million barrels per day in 2029, an increase of 10.1 million barrels per day compared to 2023.

Opec expects world oil demand to reach 118.9 million bpd by 2045, which is around 2.9 million bpd higher than expected in last year’s report. The report rolled out its timeline to 2050 and expects demand to hit 120.1 million bpd by then. That is far above other industry 2050 forecasts. BP projects oil use will peak in 2025 and decline to 75 million bpd in 2050. Exxon Mobil expects oil demand to stay above 100 million bpd through 2050, similar to today’s level.

The oil producer alliance led by Saudi Arabia earlier this month decided to delay oil production hikes for two additional months in an effort to shore up prices, but so far to no avail. Low global demand forecasts, coupled with new oil supply coming from non-Opec countries, spell a long period of subdued crude prices.

The Paris-based International Energy Agency sees demand actually leveling off by the end of the decade to around 106 million barrels per day, according to its annual mid-term outlook published in June. The IEA still sees global oil demand rising; it just forecasts a smaller rise, and expects it to peak by the end of the decade. Opec’s 2029 forecast is more than 6 million bpd higher than that of the IEA, which said in June demand will plateau in 2029 at 105.6 million bpd.

S&P Global Commodity Insights sees the medium-term future as somewhere in between, with demand reaching a peak of 109 million barrels per day in 2034 and gradually declining to fall below 100 million barrels per day in 2050.

Opec, by contrast, sees demand hitting a whopping 120 million barrels per day by 2050. All parties agree that demand will fall in the developing world, while rising in emerging markets led by India.

On the near-to-medium term outlook, analysts are bearish on oil demand and prices. This is despite the early September announcement by OPEC+ that the group would be extending its crude production cuts into December in an attempt to limit market supply.

“That two month extra time hasn’t convinced anybody who’s skeptical about the market that that’s going to do much to shore up prices,” says Dave Ernsberger, head of market reporting at S&P Global Commodity Insights. “So that’s the in-the-moment issue. But the much bigger issue is, existentially speaking, are we moving past the moment of peak oil demand?”

Opec forecasts that by 2050, there will be 2.9 billion vehicles on the road, up 1.2 billion from 2023. Despite electric vehicle growth, vehicles powered by a combustion engine will account for more than 70 per cent of the global fleet in 2050, the report said.

“Electric vehicles are poised for a larger market share, but obstacles remain, such as electricity grids, battery manufacturing capacity and access to critical minerals,” it said.

The report sees Opec+’s share of the oil market rising to 52 per cent in 2050 from 49 per cent in 2023 as US output peaks in 2030 and non-Opec+ output does so in the early 2030s.