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Amid geopolitical tensions, OPEC sticks to 2024 oil demand forecast

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OPEC and its allies, known as OPEC+, began limiting supplies in 2022 to support oil prices

The Organization of the Petroleum Exporting Countries (OPEC) in October 2023 stuck to its forecast for relatively strong growth in global oil demand for the coming days, while citing signs of an overall resilient world economy and the hopes of demand gains in China.

World oil demand will rise by 2.25 million barrels per day in 2024, compared with growth of 2.44 million bpd in 2023, OPEC said in its monthly report.

“In 2024, solid global economic growth, amid continued improvements in China, is expected to further boost oil consumption,” OPEC said in the report.

OPEC and its allies, known as OPEC+, began limiting supplies in 2022 to support oil prices.

The report also said that demand in the rest of 2023 and 2024 could take a hit in some parts of the world and trimmed its forecasts for total world demand in the current quarter and the first three months of 2024.

“Looking ahead and despite the usual seasonal rise in heating oil demand, ongoing uncertainty and economic developments in OECD Europe and other areas are expected to impact oil demand in the remainder of 2023 and in 2024,” OPEC said in reference to Organization for Economic Co-operation and Development (OECD) nations.

The report also noted the group’s oil production rising in September 2023 despite pledged OPEC+ supply cuts, driven by increases in markets like Nigeria, Saudi Arabia and Kuwait.

Meanwhile, oil prices rose over 5% on October 13 as investors remained on edge about escalating geopolitical tensions in the Middle East.

The ongoing Israel-Hamas conflict raised concerns about regional energy production being affected. The region of the Middle East accounts for over one-third of global seaborne trade.

The International Energy Agency on October 12 described the prevalent market conditions as “fraught with uncertainty” but noted that the Gaza conflict did not have a direct impact on physical supply.

The IEA also reiterated being ready to act to ensure markets remain “adequately supplied” in the event of an abrupt supply shortage. The response came amid member countries releasing emergency stocks and/or implementing demand restraint measures.

The United States has already tightened sanctions against Russian crude exports, restricting two shipping companies that it said violated the G7′s oil price cap, a mechanism which was drawn up to retain a reliable supply of Russian flows in the market while curbing the Kremlin’s war chest amid the Ukraine conflict.

“Enforcing our sanctions is central to our effort to limit Russia’s profits on its oil trade. The price cap is designed to keep Russian oil flowing while imposing new costs on Russia, not to reduce the oil supply. Indeed, oil prices fell in the hours following the announcement. Of course, oil prices are sensitive to many factors, including ongoing conflict in the Middle East,” a Treasury spokesperson informed CNBC.

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