OPEC+ has found itself in the unfortunate position of once again battling against non-OPEC producers to keep the market balanced. In its latest forecast, the EIA sees the non-OPEC+ members of the United States, Brazil, Canada, and Guyana as accounting for more than 80% of the global supply growth this year – with the United States accounting for much of it.
The EIA now sees production falling from OPEC+ members by 1 million bpd. Meanwhile, non-OPEC+ members will be churning out an additional 1.4 million bpd. Next year, OPEC+ production is expected to increase, the EIA said, by 900,000 bpd. non-OPEC+ production will grow in 2025 by 1.1 million bpd.
For OPEC, the additional oil output from non-OPEC+ members not only means delaying its production cut rollbacks - it also means ceding market share.
On the demand side of the equation, it’s been hard to ignore the stark differences in between outlooks from OPEC and the IEA - it’s been nearly decades since they’ve been so far apart, with some industry analysts chastising the IEA for its green-colored outlook, pegging oil demand growth at 1.2 million bpd. Meanwhile, OPEC, which has a particular self-interest in the market’s view of healthy oil demand, sees oil demand growth forecast at 2.2 million bpd. This is a huge gap, leaving analysts and traders guessing as to which forecast will be the closest to reality. The EIA is sandwiched in the middle, seeing a 1.4 million bpd growth.
For years, the IEA and OPEC…
OPEC+ has found itself in the unfortunate position of once again battling against non-OPEC producers to keep the market balanced. In its latest forecast, the EIA sees the non-OPEC+ members of the United States, Brazil, Canada, and Guyana as accounting for more than 80% of the global supply growth this year – with the United States accounting for much of it.
The EIA now sees production falling from OPEC+ members by 1 million bpd. Meanwhile, non-OPEC+ members will be churning out an additional 1.4 million bpd. Next year, OPEC+ production is expected to increase, the EIA said, by 900,000 bpd. non-OPEC+ production will grow in 2025 by 1.1 million bpd.
For OPEC, the additional oil output from non-OPEC+ members not only means delaying its production cut rollbacks - it also means ceding market share.
On the demand side of the equation, it’s been hard to ignore the stark differences in between outlooks from OPEC and the IEA - it’s been nearly decades since they’ve been so far apart, with some industry analysts chastising the IEA for its green-colored outlook, pegging oil demand growth at 1.2 million bpd. Meanwhile, OPEC, which has a particular self-interest in the market’s view of healthy oil demand, sees oil demand growth forecast at 2.2 million bpd. This is a huge gap, leaving analysts and traders guessing as to which forecast will be the closest to reality. The EIA is sandwiched in the middle, seeing a 1.4 million bpd growth.
For years, the IEA and OPEC used to be off in the same direction. It was customary for the forecasts to end up being both overestimates or both underestimates. And then, of course, there is 2019, when both agencies overestimated demand to a large degree due to the pandemic. But the last couple of years has triggered a divergence in the two outlooks, with the IEA underestimating, and OPEC overestimating oil demand.
Whether OPEC or the IEA will turn out to be closer may end up being less relevant than the issue of confidence in industry forecasts. If the market thinks that both groups are publishing figures that are favorable to their respective agendas, they may rely on other market forces to make decisions. This could be disastrous for an organization like OPEC, which relies heavily on the market’s perception of its oil price-setting power for its actual power. This could inject a whole new level of volatility into the oil markets.
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