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Informist, Tuesday, Aug 13, 2024

MUMBAI – Though the Organization of the Petroleum Exporting Countries has reduced its estimate for growth in global oil demand, its projections remain "too optimistic", Commerzbank AG said in a report today.

"If the estimated call on OPEC+ (OPEC and allies) is compared with current OPEC+ production, the oil market will remain significantly undersupplied according to OPEC's forecast, even if the voluntary production cuts by some OPEC+ countries are gradually reversed from October as intended," the German bank said. "However, despite the downward revision, we believe that OPEC's demand forecast is still far too optimistic and that the estimated call on OPEC+ is therefore too high." 

On Monday, OPEC trimmed its forecast for growth in global oil demand by 135,000 barrels per day, and expects growth at 2.1 mln bpd this year. In 2025, the cartel said it expects demand for crude oil to rise by a further 1.8 mln bpd, 65,000 bpd lower than the previous month's estimate.

Additionally, Commerzbank said countries in the OPEC group such as Iraq and Kazakhstan overproduced crude oil in July, deviating from their respective quotas significantly. "The notorious overproduction of some countries, particularly Iraq, is putting the willingness of other countries to the test," the bank said in the report. "If this does not change in the coming months, it is by no means certain that the other countries will continue to implement their production targets in a disciplined manner."

The overproduction comes at a time of weaker demand in China, which is not likely to increase significantly in the coming months, according to the report. China's National Bureau of Statistics will release crude oil processing data for July on Thursday.

"After last week's weak import data, refineries are unlikely to have processed more crude oil than in June, when processing hit a 6-month low," the bank said in the report. Against this backdrop, OPEC's estimates are too optimistic, according to the German bank.  End

Reported by Ashutosh Pati

Edited by Rajeev Pai

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