OPEC has projected another year of robust oil demand growth in 2026, primarily fueled by consumption in India and China. In its latest report, the Organization of Petroleum Exporting Countries estimates global oil consumption will rise by 1.4 million barrels per day (bpd), matching this year’s growth pace and outstripping the anticipated increase in global supply.
The outlook suggests potential for Saudi Arabia and its OPEC+ allies to revive some of the production cuts imposed in recent years, potentially restoring up to 2 million bpd by 2026. However, the forecast faces challenges, including signs of economic deceleration in China and OPEC’s struggles with accurate demand predictions.
Challenges to OPEC’s Optimism
OPEC’s predictions for 2024 began on a bullish note, with the Vienna-based secretariat offering more optimistic estimates than other industry bodies. However, six consecutive monthly revisions saw those estimates slashed by 47%. The uncertainty has prompted hesitation among OPEC+ members, who have delayed restarting curtailed production despite the secretariat’s upbeat outlook.
The coalition, which has been withholding supply to bolster prices, initially planned to incrementally increase output by 120,000 bpd starting in April 2024. However, the group is expected to reassess this plan during a March review.
Divergent Market Predictions
Market analysts, including the International Energy Agency (IEA), JPMorgan Chase & Co., and Citigroup Inc., forecast a potential global oil surplus in 2024—even if OPEC+ abandons its plans to increase supply. The US Energy Information Administration (EIA) echoed these sentiments, predicting a surplus of 800,000 bpd in 2026 due to simultaneous production increases from OPEC+, the US, Canada, and Guyana.
Still, geopolitical uncertainties could disrupt these forecasts. New US sanctions on Russia and potential restrictions on Iran under a prospective Trump administration could tighten global supply, offering OPEC+ an opportunity to ramp up output.
India and China Drive Demand
OPEC’s report highlights India and China as key drivers of future demand. Both nations are expected to increase oil consumption by 270,000 bpd in 2026, representing growth rates of 4.7% for India and 1.6% for China. However, there are questions about China’s long-term demand trajectory as the country shifts toward electric vehicles. Chinese crude imports, for instance, declined in 2023, raising speculation that its oil demand may peak soon.
Upcoming Decisions and Market Monitoring
OPEC+ members are set to review the market outlook during an online session of the Joint Ministerial Monitoring Committee on February 3.
As OPEC balances internal forecasts with external challenges, its ability to align production strategies with evolving market dynamics will be critical in maintaining global oil market stability.
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