U.S. oil production set to plateau amid descending costs
Flippin' Crude Demand Forecasts: OPEC vs IEA
Let's dive into the latest battle of predictions between OPEC and the International Energy Agency (IEA) – the oil demand championship!
On May 14, OPEC skipped changing its forecast for the growth of oil demand, keeping it at 1.3 million barrels per day (bpd) in 2025 and 1.28 million bpd in 2026. This comes after a reduction of 150,000 bpd a month ago due to the global trade war instigated by the USA. However, production is now predicted to increase by 800,000 bpd instead of the 900,000 bpd previously forecast.
On May 15, the IEA published its report, predicting that global oil demand will grow by 741,000 bpd in 2025, 15,000 bpd higher than its April forecast. This might suggest that both organizations are banking on a compromise between the USA and their major trading partners instead of further escalation of the conflict.
Professor Know-it-all Jumps In
Nikolai Dudchenko, an analyst at FG "Finam," pointed out that these forecasts already take into account the situation with tariff wars. However, he emphasized that these organizations don't have any insider info on how future negotiations will pan out, making their predictions tentative. He also noted that the difference in forecasts between OPEC and the IEA remains significant. According to Dudchenko, the gap in their assessments arises from different approaches to gauging demand growth and political motivations.
All About the Benjamins
Vladimir Chernov, an expert from Freedom Finance Global, explained that the IEA usually provides higher estimates for oil production growth in the U.S. and other Western countries. This is because the organization considers technological advancements in the shale sector and the potential of new projects in its forecasts. Meanwhile, OPEC, which represents oil-producing countries, often stresses the importance of controlling supply and maintaining stable prices for cartel members.
Who's Doin' the Dirty Work?
In April 2025, eight OPEC+ countries that previously reduced oil production were supposed to increase it by 115,000 b/d to 30.33 million b/d compared to March. However, they actually produced 30.81 million b/d. Notably, Kazakhstan continued to exceed its quota with a whopping 413,000 b/d or 23% of its daily oil production. Iraq also produced 72,000 b/d above its quota, and the UAE exceeded it by 15,000 b/d.
In a nutshell, the differing forecasts between OPEC and the IEA are the result of various factors, including differing assessments of economic growth, trade tensions, the increase in EV adoption, regional demand variations, and statistical discrepancies. It's a fiery debate with each side bringing its unique perspective on future oil demand, painting separate pictures of what 2025 and 2026 might hold.
Investors and business analysts should keep an eye on the ongoing disagreement between OPEC and the International Energy Agency (IEA) regarding oil demand forecasts, as these predictions can impact investing decisions in the energy and oil-and-gas industry.
Professor Nikolai Dudchenko claims that both organizations' predictions are tentative, as they don't have insider information about future negotiations. Meanwhile, Vladimir Chernov emphasizes that the IEA tends to provide higher estimates for oil production growth in developed countries due to its consideration of technological advancements in the shale sector.
Moreover, the difference in forecasts may stem from OPEC's focus on controlling supply and maintaining stable prices for its member countries, while the IEA relies on gauging demand growth and political motivations. It is also essential to note that, in April 2025, several OPEC+ countries exceeded their agreed oil production quotas.
Therefore, considering these factors and potential discrepancies, the stock market and the broader energy industry may experience significant fluctuations as the oil demand scenario becomes clearer.
