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Just hours before the COP28 summit ended with the historic agreement to phase out fossil fuels, OPEC+ released its latest monthly oil market report on November 13^th.

The report said that global oil market fundamentals “remain strong” despite “exaggerated negative sentiments”.

Demand stagnating as oil prices stall

Nevertheless, demand for oil appears to have stalled, with November 2023’s world oil demand sitting at 2.5 million barrels per day – unchanged from the November 2022 rate. For 2024, world oil demand is expected to be lower than this at 2.2 million barrels per day, unchanged from the previous October 2023 assessment.

In the report, OPEC hinted at continued pressures on industry in 2024 leading to lower oil prices and, possibly, demand:

The estimated 3Q23 global economic growth is 2.6 percent, year-on-year. However, a forecast suggests a slight easing for 4Q23. While the industrial sector’s impact on the global economy is expected to improve in relative terms by yearend, this trend is yet to fully materialize as industrial output and, consequently, global goods trading continues to face challenges.”

In a paragraph rich with irony, OPEC also described some of its biggest expected areas for liquid supply growth in 2024 to include the United States, Canada and Norway – some of most outspoken advocates against the ‘reduction’ of fossil fuels compared to a ‘phase out’ in the COP28 agreement.

OPEC production cuts coming in 2024?

When it came to the oil price, the report’s feature article hinted that further OPEC production cuts may be coming, in order to balance world supply and demand:

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Despite the above healthy and supportive market fundamentals, oil prices have trended lower in recent weeks, mainly driven by financial market speculators, as they have sharply reduced their net long positions over the month of October, compared to the late September… In fact, data shows that hedge funds and other money managers have heavily cut their bullish positions over the month of October… In total, they have sold an equivalent of more than 200 million barrels of oil since late September, or about 37 percent of total bullish positions. This has fueled market volatility and accelerated the price decline. The selloffs were also observed in speculative positions in petroleum products in October.”

The feature article went on to praise OPEC+ for maintaining price stability, saying that:

Going forward, countries participating in Declaration of Cooperation (DoC) will continue their commitment to achieve and sustain a stable oil market and provide long-term guidance for the market, in line with their decisions most recently reaffirmed during the 35th OPEC and non-OPEC Ministerial Meeting, which extended the agreement until the end of 2024. Clearly, the voluntary production adjustments by many DoC countries as of November until end-2024, along with extended Saudi Arabian voluntary crude production adjustment of 1.0 million barrels per day until the end of 2023… will contribute significantly to achieve and sustain global oil market stability.”

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