Daily Management Review

OPEC Secretary General Predicts A Strong Long-Term Demand Outlook


OPEC Secretary General Predicts A Strong Long-Term Demand Outlook
The Secretary General of OPEC stated on Tuesday that the postponement of plans to expand Saudi Arabia's oil output should not be construed as a sign that the market for crude oil is contracting.
At the World Governments Summit in Dubai, Haitham Al Ghais told Reuters, "First of all, I want to be clear I cannot comment on a Saudi decision... but this is in no way to be misconstrued as a view that demand is falling."
Aramco (2222.SE), the state oil firm in Saudi Arabia, was given an order by the government on January 30 to reduce its maximum sustained production capacity to 12 million barrels per day (bpd). This is one million barrels per day less than the target that was set in 2020 and is expected to be attained in 2027.
The unexpected change in the kingdom's oil expansion strategy, according to sources who spoke with Reuters, was at least six months in the making and was predicated on an analysis showing that a large portion of Saudi Arabia's spare capacity was not being monetized.
As the biggest oil exporter in the world, Saudi Arabia holds a de facto leadership position within the Organisation of Petroleum Exporting Countries.
In its annual outlook released in October, OPEC increased its medium- and long-term projections for global oil consumption.
According to its World Oil Outlook, growth will be driven mostly by China, India, other Asian countries, Africa, and the Middle East, with global oil demand expected to reach 116 million barrels per day (bpd) by 2045—roughly 6 million bpd more than the previous year's estimate.
"We stand by what was published in our latest outlook we firmly believe that it is robust," Al Ghais said.
Al Ghais stated that if the statistics differ, we would have to "wait and see" until September or October when OPEC releases the 2024 edition of the outlook later this year.
"But we believe now our numbers stand and are very solid numbers," he said.
"If anything, changing narratives we are seeing now ... a lot of countries in the world turning back and slowing down and rethinking their net zero goals ... that will create further long-term demand for oil."
Al Ghais added that he was unconcerned about Angola's December announcement to leave the group.
"It is not the first time a member exits the organisation for its own considerations," he stated.
I'm not too worried about that because we've had members join and depart as well as members leave and return."
On December 21, Angola announced its decision to exit OPEC, a move that at the time caused oil prices to plummet and raised concerns about the cohesion of both OPEC and the larger OPEC+ coalition, according to some analysts.
Al Ghais the nation was free to re-join at a later time if it so desired.
According to Al Ghais, the voluntary nature of the production cuts being carried out by OPEC+—a group that consists of OPEC and its allies, including Russia—reflects the group's adaptability.
"For now it's probably the most suitable way," he said.
"A voluntary cut is a sovereign decision by a country to adjust its production. It shows the inherent flexibility in our approach and that we have several means and ways to attend to market stability."