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Opec+ now controls barely half of global oil production as demand growth slows “drastically” and US output reaches new highs, the west’s energy watchdog said on Thursday.
The International Energy Agency said recent production cuts to prop up the oil price have reduced the market share of Opec+ to just 51 per cent — the lowest since the expanded cartel was set up in 2016.
Despite the output cuts, oil prices are lingering below $75 a barrel, compared with nearly $100 in September, with the IEA noting that “global oil demand growth will slow drastically” in the current quarter.
Citing macroeconomic factors such as higher interest rates and a “fading rebound from Covid-induced lows”, it said demand would be almost 400,000 barrels a day lower for the quarter than it had anticipated just last month.
The watchdog added that the sway of Opec+ over the market could fall further next year, because increases in production by non-members are expected to be enough to meet the entire rise in global demand forecast for 2024.
It noted that record supply from the US and rising output from producers such as Guyana and Brazil would increase oil supplied by non-Opec countries by 1.2mn b/d in 2024 — more than the 1.1mn b/d forecast for demand growth.
The cartel — which includes Opec members plus countries such as Russia, Mexico and Azerbaijan — has announced several rounds of supply cuts over the past 14 months. But its efforts to support prices above $80 a barrel have been hindered by production by non-members.
The IEA says the US, which is already producing 20mn b/d, will remain the leading source of supply growth next year.
“The continued rise in output and slowing demand growth will complicate efforts by key producers to defend their market share and maintain elevated oil prices,” the IEA said.
The IEA now expects oil demand growth to tumble from a year-on-year rate of 2.8mn b/d in the third quarter of 2023 to 1.9mn b/d in this quarter.
It had previously forecast that demand growth this quarter would be 2.3mn b/d.
The watchdog added that more than half of this revision was due to weaker demand in Europe, “where unprecedented rate hikes in 2022-23 are working their way through an already stagnant manufacturing sector”.
The agency also forecasts weaker demand for the Middle East and Russia, in an indication of the breadth of the economic slowdown.
But it expects global oil demand to increase by 130,000 b/d more than previously projected in 2024, adding that a “soft landing” in the US was “coming into view”.
In such a scenario, the US Federal Reserve would succeed in bringing inflation back towards its 2 per cent target without tipping the world’s largest economy into a recession.
