Opec sees higher oil demand, for longer

Opec has massively raised its global oil demand forecasts, noting a "pushback against the opinion that the world should see the back of fossil fuels."

Opec secretary general Haitham Al Ghais said "policies and targets for other energies" were faltering "due to costs and a more nuanced understanding of the scale of energy challenges," in the group's latest World Oil Outlook (WOO).

Opec now sees oil demand continuing to grow over the next two decades, reaching 116mn b/d in 2045, from 99.6mn b/d in 2022. And even then it sees a "potential to be even higher."

The latest forecast represents an upwards revision of 6.2mn b/d compared with last year's WOO which had oil demand at 109.8mn b/d in 2045, the same as 2040.

Opec's projections are in stark contrast to those of the IEA which forecast oil demand to peak by 2030 in its medium-term outlook on the oil market back in June.

Opec's forecast reflects the groups belief that oil will play a key role for decades to come, despite growing calls for a ramp down in oil use to help meet climate change goals.

In the medium term, Opec's sees oil demand hitting 110.2mn b/d in 2028, compared with 105mn b/d projected by the IEA. Beyond this, Opec forecasts global demand at 112mn b/d in 2030, 114.4mn b/d in 2035 and 115.4mn b/d in 2040.

The outlook highlights marked differences in oil demand between a developed and developing world. OECD demand grows marginally up to a peak of 46.6mn b/d in 2026 before starting a steady descent from 2028 onwards. By 2045, OECD demand is 9.3mn b/d lower than in 2022.

Opec says this will be mainly driven by energy efficiency improvements and the substitution of oil with electricity and gas. It notes an increased uptake of electric vehicles, the displacement of oil-based heating systems, less oil use in power production and the penetration of alternative fuels in the marine and aviation sectors.

Non-OECD oil demand is expected to grow by 25.7mn b/d between 2022 and 2045, driven by high population growth, an expanding middle class and robust economic growth. While China leads global oil demand growth over the next few years, longer-term India becomes the world's largest single source of incremental demand. By 2045, Indian demand is 6.6mn b/d higher than in 2022, whereas Chinese demand is 3.9mn b/d higher.

More oil investment

Opec sees global liquids supply rising to 106.3mn b/d in 2025 and 116mn b/d in 2045, compared with 100mn b/d in 2022. Opec liquids production is set to grow by 11.9mn b/d to 46.1mn b/d in 2045, with the group's market share rising from 34pc to 40pc.

Non-Opec liquids supply is expected to grow by 7mn b/d to 72.7mn b/d in 2028, but peak shortly after 2030 at around 73.5mn b/d. But by 2045, supply is projected to fall to 69.9mn b/d as the declines from the US and other mature producers, such as Norway, Mexico, Colombia, the UK and China, fail to offset continuing growth from Canada, Guyana, Argentina, Brazil and Kazakhstan.

Opec says that the world needs to invest $14 trillion in the oil sector up to 2045, split between $11 trillion for the upstream, $1.7 trillion for the downstream and $1.2 trillion for the midstream. This is much higher than the $12.1 trillion forecast last year, with the increase mostly driven by the upwards adjustment to demand projections.

In contrast, the IEA has warned of the "economic and financial risks of major new oil and gas projects," based on its expectations of fossil fuel demand to peak by 2030."Calls to stop investments in new oil projects are misguided and could lead to energy and economic chaos," Opec secretary-general Haitham Al Ghais said.

Opec forecasts energy-related CO2 emissions to "approach a peak sometime around 2030." In 2045 annual energy related CO2 emissions are still seen at 34bn tonnes, only 300mn t below 2022 levels.

By Aydin Calik

OPEC global oil demand forecasts mn b/d