In its latest monthly report, the Organization of the Petroleum Exporting Countries (OPEC) lowered its forecast for global oil demand growth in 2024 for the second time in a row, reflecting the challenges faced by OPEC and its allies (OPEC+) in balancing supply and demand in the current market environment, especially against the backdrop of continued declines in oil prices.

OPEC expects global oil demand to grow by 2.03 million barrels per day in 2024, down from the 2.11 million barrels per day forecast in August. In addition, demand growth in 2025 was also revised down from 1.78 million barrels per day to 1.74 million barrels per day. Last week, OPEC+ decided to postpone its planned production increase originally scheduled for October to December in response to market pressures.

OPEC cited China's economic slowdown and transition to clean energy as the main reasons for the downward revision in global demand. OPEC lowered its forecast for China's oil demand growth in 2024 from 700,000 barrels per day to 650,000 barrels per day.

Although China's economic expectations remain solid, a weak real estate market and the popularity of liquefied natural gas (LNG) trucks and electric vehicles may have a negative impact on future diesel and gasoline demand.

After the report was released, market pessimism about the outlook for global oil demand intensified, causing oil prices to fall further. Brent crude oil prices fell below $70, hitting a 33-month low of $69.19 per barrel. West Texas Intermediate (WTI) crude oil prices also fell 4.3% to close at $65.75 per barrel, the lowest closing price since December 2021.

Weak oil prices prompted OPEC+ to postpone its decision to increase production, aimed at responding to oversupply and weak demand, but market pressure remains in the short term.

Market analysis pointed out that there are large differences in the forecasts of demand growth in 2024 among various oil institutions, partly due to different views on China's economic growth, and partly because there is no consensus on the speed of the global transition to clean energy.

OPEC's forecast is still at the high end of industry forecasts, which contrasts with its decision to postpone production increases last week, reflecting the contradictions and challenges of the organization in balancing market supply and demand. Despite the slowdown in demand forecasts, OPEC still expects total global oil demand to reach 104.2 million barrels per day this year and 106 million barrels per day in 2024.

OPEC's research department in Vienna pointed out that global oil inventories are falling rapidly and a supply shortage of 3 million barrels per day may occur in the fourth quarter. Unless OPEC+ increases supply, the market may face a greater risk of supply and demand imbalance.

However, despite the inventory data showing tight supply, OPEC's actions have been relatively conservative. This lack of active response has raised questions about OPEC's confidence in the subsequent rise in oil prices. This is not the first time OPEC has faced such problems. At the end of last year, the organization predicted a supply shortage, but oil prices fell against the trend, and OPEC was forced to implement a new production cut agreement.