OPEC prepares for increased oil demand

In the face of calls from climate experts to phase out fossil fuels such as oil, coal, and gas, the Organization of the Petroleum Exporting Countries (OPEC), the group of the world's largest oil exporters, has warned of a completely different reality: the world is consuming more wood, oil, coal, and gas than ever before. This was emphasized by Haitham Al Ghais , Secretary General of OPEC, during the presentation of the report "The Global Oil Market Vision to 2050."

OPEC not only calls the "rapid" exit from the "narrative of rapidly eliminating oil and gas" to combat climate change "unviable" and "fanciful," but also forecasts an increase in global oil consumption until at least 2050. Specifically, OPEC's forecasting work predicts that global demand for "black gold" will grow by 18.6% between 2024 and 2025, rising from 103.7 million barrels per day to around 123.

Based on this starting point, the Saudi- led organization urges investment of $18.2 trillion in the global oil industry as a guarantee of energy security and market stability, since "any deficit would pose a danger to both," they say. The estimate reflected in the report entails an upward revision of the investment, equivalent to $800 trillion , 4.6% more than the estimate made a year ago.

Thus, the largest group of oil-exporting countries clashes with the recommendations for an early exit from fossil fuels advocated by climate experts, which many countries are already disengaging from, according to the report. This controversy also arises with the International Energy Agency , which estimates a slight decline in oil production by 2030 after peaking the previous year. Al Ghais denies this by stating that no peak in oil demand is in sight.

The report comes days after Saudi Arabia, Russia, Iraq, the United Arab Emirates, Kuwait, Kazakhstan, Algeria, and Oman agreed on July 5 to increase collective production levels for August by 584,000 barrels per day from the required July production level. The decision is based on "current oil market fundamentals and the global economic outlook."

With this, the Saudi-led group seeks to oversize its market volume in order to gain a larger share. The measure was agreed upon after three consecutive increases of 411,000 barrels per day announced in recent months. All of them are part of the ten's attempt to undo the 2.2 million barrels per day cuts implemented since 2022.

In this sense, crude oil prices fell following the COVID-19 pandemic as demand also declined, shifting OPEC+ talks toward cutting oil production to stabilize the price of this fossil fuel. On April 2, 2023, they agreed to a further production reduction of 1.2 million barrels per day through the end of 2023, adding to the cuts already implemented.

Currently, crude oil production from countries outside the organization founded 60 years ago has skyrocketed, led especially by the United States, where the Donald Trump administration made clear its shift in stance on climate change by withdrawing from the Paris Agreement.

The International Energy Agency forecasts that non-OPEC generation will increase by 1.4 million barrels per day overall, fearing that the oil market could end with a surplus of around 600,000 barrels per day. OPEC+ seeks to compete with other producers to gain a larger market share, which will lead to a drop in the price per barrel.

It's worth noting that OPEC+ is the expansion of OPEC member countries in 2016 in response to the drastic drop in oil prices driven by the significant increase in US shale production.