The Organization of the Petroleum Exporting Countries (OPEC) is gearing up to revise its methodology for assessing global demand for its crude oil, transitioning from the traditional ‘call on OPEC’ to ‘call on OPEC+’ in its highly anticipated monthly oil market report. This move signals the group’s continued dedication to the broader OPEC+ alliance in regulating supply to the market.
Sources familiar with the matter informed Reuters that the adjustment in forecasts regarding the volume of crude OPEC needs to produce for a balanced supply-demand equilibrium is slated to feature in the Monthly Oil Market Report (MOMR) for May, scheduled for release on May 14.
According to one source, the demand for crude from producers encompassed within the Declaration of Cooperation (DoC), the official term for OPEC+, has gained prominence in evaluating market dynamics. OPEC had introduced an assessment of ‘Demand for DoC crude’ in its April report, alongside the outlook on demand for OPEC crude. However, starting from May, it will cease to publish estimates of ‘Demand for OPEC crude’, as per Reuters’ sources.
In the April report, OPEC projected the demand for DoC crude to reach approximately 43.2 million barrels per day (mb/d) in 2024, marking a rise of around 0.9 mb/d compared to the estimated level for 2023. Anticipations for 2025 indicate a further increase in demand for OPEC+ crude, reaching about 44.0 million barrels per day, up by 800,000 bpd from the forecasted figure for 2024.
Meanwhile, demand for OPEC crude is anticipated to escalate to roughly 28.5 million bpd this year, reflecting a boost of 1.2 million bpd compared to the estimated level for 2023. Projections for 2025 envision demand for OPEC crude reaching approximately 29.0 million bpd, marking a rise of 400,000 bpd over the expected level for 2024.
The OPEC+ coalition, comprising OPEC members and 10 non-OPEC producers led by Russia, has emerged as a more influential entity in the global oil market compared to OPEC alone. This alliance was forged at the end of 2016 in response to the market and price downturn of 2015-2016 following the 2014 glut.
Recent calculations by Reuters indicate that OPEC+ now commands a 41% share of global oil supply, surpassing the 27% share held solely by OPEC since Angola’s departure from the cartel in 2023.
The growing influence of OPEC+ is evident as market analysts speculate on the outcomes of the upcoming OPEC+ meeting scheduled for June 1. Currently withholding around 2.2 million bpd from the market until the end of the first half of this year, the alliance is poised to determine early next month the course of action regarding ongoing production cuts into the second half.
Goldman Sachs, among others, anticipates OPEC+ to maintain its production output reduction agreement at the forthcoming meeting, reversing its earlier stance of a potential partial unwind of the cuts. The decision is influenced by recent data revealing higher-than-expected global oil inventories, indicating a market less constrained than desired by OPEC.
Against the backdrop of Brent Crude prices dipping since mid-April to the low $80s per barrel, analysts suggest that OPEC+ may refrain from boosting production from July in response to market conditions.
“Price weakness increases the likelihood that OPEC+ members will fully rollover their 2.2m b/d of additional voluntary cuts into the second half of the year, which risks overtightening the market later in 2024, assuming no downside surprises on the demand side,” noted ING strategists Warren Patterson and Ewa Manthey in a recent statement.
They added, “However, US elections at the end of the year could also possibly influence the choice OPEC+ members make.”
While OPEC may have ceded market share to non-OPEC+ supply, notably the United States, the broader coalition within the OPEC+ group is consolidating its sway over oil market supply and prices.