The OPEC+ group has faced significant hurdles in managing oil supply and prices this year. Several member countries have overproduced, undermining the effectiveness of production cuts from other members. When summer arrived, actual consumption data for the first two quarters of 2024 revealed that China’s oil demand growth was far below OPEC’s expectations.
As the year progresses, OPEC+ now faces even greater uncertainty with the incoming U.S. President, Donald Trump, whose policies could disrupt the global oil market. China’s weak demand for oil has already derailed OPEC+’s efforts to control supply. The country’s slower economic growth, combined with a property crisis that has reduced construction and diesel consumption, as well as a surge in electric vehicle (EV) sales, has kept oil demand lower than expected.
OPEC has been caught off guard by the rise of electric mobility in China, according to the International Energy Agency’s (IEA) World Energy Outlook 2024. In response, OPEC revised its 2024 global oil demand forecast in October, marking the third consecutive month of downward adjustments. The group acknowledged that its initial projections for Chinese oil demand growth were overly optimistic.
IEA Executive Director Fatih Birol noted that global oil demand in 2024 is expected to remain weak, with China’s reduced oil consumption playing a major role. He explained that this year, oil demand is much lower than in previous years and expects this trend to continue, primarily due to China’s struggling economy.
China’s official crude oil import data further highlights the challenges OPEC faces. In October, China imported 10.53 million barrels per day (bpd), marking a 9% decline from the same month in 2023. This is the sixth consecutive month of lower imports compared to the previous year. These declining import trends are putting downward pressure on oil prices.
Trump’s Policies Add Uncertainty
In addition to China’s weak demand, OPEC+ now faces uncertainties linked to U.S. President-elect Donald Trump’s policies. Trump has pledged to implement stricter sanctions on Iran, an OPEC member that was exempt from the group’s production cuts. While lower Iranian oil supply could push prices higher if demand remains steady, other Trump administration policies could reduce global oil demand.
Trump has proposed tariffs of 10% on all U.S. imports, as well as a 60% tariff on imports from China. Such measures could harm global economic growth and further depress oil demand. OPEC+ is already preparing for weak global oil demand growth, especially as it plans to return 2.2 million bpd of supply to the market in 2025.
According to Wood Mackenzie, tariffs could slow U.S. and global economic activity, reducing oil demand by up to 500,000 bpd in 2025, which could lower oil prices by $5 to $7 per barrel. Despite the industry’s hope for a more favorable stance under Trump, U.S. oil production growth is expected to remain limited, driven by the large shale companies’ preference for capital discipline over rapid expansion.
Tariffs may also drive up costs for U.S. oil producers and service companies, further complicating the situation. Although Trump’s policies may be more supportive of the oil and gas industry, analysts believe that price fluctuations will ultimately dictate the pace of production growth.
As uncertainties grow with Trump’s administration, OPEC+ may need to frequently adjust its production strategy to respond to shifting global oil supply and demand dynamics.
Related Topics:
- OPEC+ Struggles to Boost Oil Prices Amid Attractive Discounts on Petcoke
- Crude Oil Faces Second Day of Losses as IEA and OPEC Warn of Oversupply
- Oil Prices Decrease as OPEC Data Creates Worries About Demand