Dynamics shaping global oil demand in 2024

Oil prices are facing a reversal in gains this week as concerns over higher global output and weak demand growth forecasts in key regions like China and India continue to weigh on the market. The move by OPEC to cut global demand forecasts has further exacerbated the situation. Chinnan Dikwal, Vice Chair at the African Energy Council, discussed the dynamics shaping global oil price and production movements in a recent CNBC Africa interview. According to Dikwal, the initial forecast by OPEC for 2024 projected a demand of 2.25 million barrels per day, but this number has steadily decreased due to factors such as slowing demand in China. The aggressive stimulus measures taken by China, injecting trillions of yuan into the economy, have failed to prop up global oil demand. The Vice Chair also highlighted the shift in OPEC's forecast for 2025, which now stands at a gloomy 1.5 million barrels per day. When questioned about the outlook for oil prices, Dikwal expressed concerns about the short to medium-term pressures on pricing. The potential oversupply in the market, coupled with a strengthening US dollar and the aggressive production agenda under the Trump administration, could lead to a scenario reminiscent of the 2014 oil price crash triggered by the shale gas boom. The discussion then turned to the implications for Nigeria, a significant oil-producing country. Dikwal warned of the risks posed by increasing supply from countries like Libya, alongside the continued decrease in global demand. With Nigeria's budget pegged on a much higher oil price than the current reality, there are challenges ahead in effectively managing fiscal targets. Addressing the issue of non-OPEC supply growth and the impacts of a firmer US dollar, Dikwal emphasized the potential negative effects on commodities like oil and gas. He suggested that if the policies under 'Trump 2.0' mirror those of the previous administration, a strong dollar could lead to broader market pressures. Moreover, the Vice Chair highlighted the trend of rising supply and diminishing demand globally, signaling a precarious situation for oil prices. With Libya set to increase production and Nigeria also eyeing higher output levels, the competition among low-cost producers intensifies. In terms of Nigeria's specific oil export numbers, Dikwal pointed out the discrepancy between the official figures including condensate and OPEC's criteria that exclude such components. While there have been efforts to boost production levels, achieving the ambitious target of 2 million barrels per day remains a challenging task. Overall, the interview painted a somber picture of the global oil market, with uncertainties surrounding both supply and demand dynamics. As countries like Nigeria navigate through these volatile conditions, strategic planning and flexibility in budget management will be crucial in mitigating the impact of fluctuating oil prices and market shifts.