The sun sets over crude oil storage tanks at Saudi Aramco's Ras Tanura refinery and oil terminal Juaymah terminal in Ras Tanura, Saudi Arabia, Monday, October 1, 2018.
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global benchmark Brent crude oil Oil prices fell below $70 a barrel in early September (the lowest level in 33 months), which was good news for consumers, who will see lower prices as a result.
It's also a nightmare for OPEC+, for whom oil revenue is vital.
Earlier this month, a coalition of oil producers led by Saudi Arabia decided to postpone an oil production increase for another two months in an effort to boost oil prices, but so far it has had no effect. Lower global demand forecasts, coupled with new oil supplies from non-OPEC countries, have contributed to prolonged low crude prices.
This has led some in the market to ask the question: Have we officially reached “peak oil”? Has demand growth peaked, or is it just going downhill from here?
Based on OPEC's own forecasts, this is a difficult call.
The oil-producing group's “World Oil Outlook 2024” report released on Tuesday predicts global energy demand will grow strongly by 24% between now and 2050. Reaching 112.3 million barrels per day, an increase of 10.1 million barrels per day compared with 2023.
A significant number of energy analysts appear to disagree with this calculation – especially those at the International Energy Agency. The Paris-based agency said demand would actually level off to about 106 million barrels per day by the end of the century. Mid-year outlook released in June. The IEA still expects global oil demand to rise; it just forecasts a smaller increase and expects it to peak by the end of the century.
In recent years, there has been a well-publicized battle over forecasts between OPEC and the International Energy Agency, which has pushed for a net-zero emissions future.
Meanwhile, S&P Global Commodity Insights sees the medium-term future as somewhere in between, with demand peaking at 109 million barrels per day in 2034 and gradually declining to below 100 million barrels per day in 2050.
By comparison, OPEC expects demand to reach 120 million barrels per day by 2050.
There is consensus that demand from developing countries will fall while demand from emerging markets, led by India, will rise.
medium term outlook
As for the short- to medium-term outlook, analysts are pessimistic about oil demand and prices. Although OPEC+ announced in early September that the organization would extend crude oil production cuts until December to limit market supply.
“The extra two months didn’t convince anyone who was skeptical of the market,” Dave Ernsberger, head of market reporting at S&P Global Commodity Insights, told CNBC. How much this will do to boost prices.
“So that's the current question. But from an existential perspective, the bigger question is, have we passed the point of peak oil demand?”
Ensberg pointed to the growth of alternative forms of energy, including the increasing use of biofuels in the maritime industry.
“We are entering a post-demand growth era. This is not a post-oil era, but a post-growth era. How does OPEC+, the market readjust to a low-growth or no-growth world's overall demand?”
China, the world's largest oil importer, is also working on electrification, dimming prospects for rising oil prices.
Li-Chen Sim, a non-resident scholar at the Middle East Institute in Washington, told CNBC: “The biggest threat to OPEC+ oil price increases comes from outside.”
These are mainly “low demand, especially from China, oil supplies from non-OPEC+ sources and internal oil supplies; some members are producing in excess of allocated quotas.”
Sim said estimates from international and Chinese sources showed China's demand for oil and refined products was slowing.
She pointed out that this is partly because China's economic growth has slowed in recent years, about 3% to 5% per year, but is still better than many other countries.
“But there is also a structural component to the reduction in oil consumption, driven by conscious efforts to reduce high dependence on oil (and gas) imports and reflected in policies such as the spread of electric vehicles and incentives to expand renewable energy and nuclear power. Sim added.
In the short term, OPEC+ is still expected to resume some production in December, with several countries in the alliance exceeding quotas and more supply from non-OPEC+ producers such as the United States, Guyana, Brazil and India entering the market.
“As long as there is a threat of supply returning to the market, it will be difficult for prices to rise significantly,” Ensberg said.
Many analysts believe that in the long term, the eventual decline of the oil age, if it occurs, will be caused by changes in demand rather than reduced supply.
Late Saudi Arabia Sheikh Ahmed Zaki Yamani 2000 said: “The Stone Age did not end for a lack of stone, and the Petroleum Age will end, but not for a lack of oil.”