Analysis Energy
Thirst for oil according to OPEC only getting bigger
That fossil fuels will be phased out in the next 25 years is something we can forget according to OPEC. According to the organization of oil-producing countries, the world will only have a greater thirst for the black gold. According to a long-term forecast, the demand in 2050 is 17.9 million barrels per day higher than in 2023. The number of electric cars and trucks is increasing rapidly, but the total vehicle fleet is also growing. And the oil cartel believes that in 2050, 70% of them will have an internal combustion engine.
The oil price has recovered from the dip below $70. Wednesday afternoon, September 25th, the Brent benchmark is back above the $70 threshold at $74.53. However, the fuel price is not taking a big leap. Throughout the period between mid-December 2023 and September, oil was priced higher.
There are several factors supporting the price. Tensions in the Middle East are increasing. Furthermore, the central banks of both the United States and China have taken measures to boost the economies of their respective countries. The U.S. central bank did not cut interest rates by 25 but by 50 basis points last week. The larger rate cut is expected to boost the U.S. economy and consequently the demand for oil as well.
The Chinese central bank announced a broad support package to bolster the country's weak economy. The stimulus measures were presented on Tuesday, September 24th. These are the most extensive measures since the COVID-19 pandemic. The interest rate for short-term loans is being reduced, Chinese banks are required to hold less money in reserve, and measures are being taken to stimulate the stock and real estate markets. Analysts, however, doubt whether this will be enough to achieve the goal of growing the economy by 5%. The oil price also dropped slightly after the announcement.
What has a bullish effect on the oil price are the tensions in the Middle East, which have escalated further since last Tuesday when Hezbollah members' potatoes and walkie-talkies exploded. There are mutual shootings, and in Israeli air strikes on Beirut, more than 550 people have been killed according to Lebanon. There is fear that the war will spread in the region.
Next storm heading to Gulf of Mexico
According to data from the American Petroleum Institute (API), crude oil inventories in the U.S. decreased by 4 million barrels last week, which is much more than the 0.9 million expected by the market.
In the U.S., there are further production issues. While the oil platforms in the Gulf of Mexico were mostly back in operation after Hurricane Francine passed, another tropical storm (Helene, which threatens to become a hurricane) is already heading towards the area. Four of the 371 manned oil platforms in the Gulf of Mexico are currently evacuated as a precaution according to the U.S. Bureau of Safety and Environmental Enforcement (BSEE). 16.21% of oil production is halted.
In 2050, according to OPEC, 70% will still run on fossil fuels
OPEC published a long-term vision on Tuesday, September 24th, the World Oil Outlook 2050. According to the forecast, the global vehicle fleet will have increased from 1.7 billion in 2023 to 2.9 billion in 2050. The outlook assumes that despite the rise of electric vehicles, traditional internal combustion engines will still account for more than 70% of road transport in 2050.
The oil cartel expects that global oil demand will reach 112.3 million barrels per day in 2029, 10.1 million barrels more than in 2023. By 2050, the total oil demand is projected to be 120.1 million barrels per day. OPEC further predicts that the Middle East's share of global oil exports (almost 49% in 2023) will slightly decrease by 2030, only to increase further to 58% by 2050.
