Another month, another downward revision for global oil demand from Opec — but tanker owners should fear not, according to DNB.
The bloc slashed its 2024 demand forecast by 110,000 barrels per day to 1.82m bpd and its 2025 forecast by 100,000 bpd to 1.54m bpd, the fourth such downgrade in as many months and amid back-to-back delays on unwinding its production cuts.
But DNB analyst Jorgen Lian said total demand remains above current production levels, making it possible for Opec to go through with its decision to start pumping more oil from the end of the year.
“Based on current production levels, it may imply that Opec still sees room for the planned and gradual unwinding of production cuts by 2.2m bpd through 2025,” he said.
The bloc decided in September to put off raising production levels until the end of November and did so again in October, pushing the move back to the end of 2024.
The decision prompted analysts at Fearnley Securities at the time to wonder if a weak oil price and low demand would push the group to put the decision off further.
But in his note published on Tuesday, Lian said while Chinese demand was lowered by 130,000 bpd to 450,000 bpd for 2024 and overall demand was slashed by 200,000 bpd to 43m bpd it was still higher than production levels from the bloc in the third quarter.
He noted that Opec produced 40.6m bpd in the three months to 30 September and the demand figures were 2.4m bpd above production levels over that period and 2.1m bpd above average Opec production for the first three quarters of the year.
Tanker market observers have been looking forward to an earnings boost from Opec’s decision to start unwinding cuts at some point this year.
The growth in production is expected to be a boon for VLCCs, which have struggled in comparison with its smaller suezmax and aframax competitors, especially as Opec appears to be ready to shift its focus from maintaining price levels to defending market share.
On Tuesday, Clarksons average VLCC rates rose slightly to $37,000 per day but remained largely flat from last week.
Its suezmax average fell to $36,400 per day and was 15.7% lower than last week, a trend also seen in the aframax space where rates fell to $29,200 per day, a 15.2% drop week on week.
