OPEC updates its oil market reports to include OPEC+ forecasts, emphasizing the alliance's increased global influence.
The Organization of the Petroleum Exporting Countries (OPEC) is set to start reporting on the demand forecast for its broader alliance, OPEC+, rather than just for its own crude oil. The change would be reflected in OPEC's Monthly Oil Market Report (MOMR) starting from the May edition, which is due to be released on May 14.
The new reporting strategy underscores the importance of the OPEC+ alliance – which includes OPEC members and 10 non-OPEC producers led by Russia – in managing global oil supply. This alliance, known officially as the Declaration of Cooperation (DoC), has grown in relevance and is now considered a more influential force in the market than OPEC alone.
In the April MOMR, OPEC introduced an assessment of 'Demand for DoC crude' for the first time. It projected that this demand is expected to be around 43.2 million barrels per day (mb/d) in 2024, an increase of approximately 0.9 mb/d from the estimated level for 2023. For 2025, the demand for OPEC+ crude is forecasted to rise to about 44.0 mb/d, which is up by 800,000 bpd from the 2024 figure.
Conversely, the demand for OPEC crude alone is anticipated to increase to about 28.5 mb/d in 2023, up by 1.2 mb/d from the estimated level for 2023, reaching about 29.0 mb/d in 2025.
The alliance's market share is significant. As of the end of 2023, OPEC+ held a 41% share of the global oil supply, compared to a 27% share for OPEC alone, particularly after Angola's departure from the cartel.
The impact of OPEC+ on the market is evident as industry analysts speculate about the decisions to be made at the next OPEC+ meeting scheduled for June 1. Currently, the alliance is withholding around 2.2 million bpd from the market, and it will decide how to proceed with these production cuts in the second half of the year. Goldman Sachs, changing its previous prediction, now expects OPEC+ to maintain its production cuts in the upcoming meeting.
The speculation comes against the backdrop of falling Brent Crude prices since mid-April to the low $80s per barrel and data indicating higher than expected global oil inventories. Some analysts, like ING's Warren Patterson and Ewa Manthey, suggest the price weakness could lead OPEC+ to extend their voluntary cuts, potentially tightening the market in 2024. However, they also note the potential influence of the U.S. elections on OPEC+ decisions later in the year.
While OPEC may have lost some market share to non-OPEC+ sources, particularly the United States, the decision to forecast 'Demand for DoC crude' instead of 'Demand for OPEC crude' in its monthly reports demonstrates the strengthening influence of the OPEC+ alliance over global oil supply and prices. The industry awaits the release of the May MOMR and the outcomes of the next OPEC+ meeting to gauge the future direction of oil markets.
