OPEC Faces Shrinking Market Share and Crude Oil Demand Decline in 2024

OPEC's 2024 Challenges: Market Share and Demand Decline

---

In the first half of 2024, the Organization of the Petroleum Exporting Countries (OPEC) is anticipated to face a decline in demand for its crude oil, alongside a reduction in its global market share to the lowest levels since the Covid-19 pandemic. This situation arises from a combination of factors including production cuts and Angola's decision to leave OPEC in January 2024. The exit of Angola, following the departures of Ecuador in 2020, Qatar in 2019, and Indonesia in 2016, will leave OPEC with 12 members. Consequently, the organization's production will drop below 27 million barrels per day, constituting less than 27% of the total global supply of 102 million barrels per day.

The last time OPEC's market share was as low as 27% was during the 2020 pandemic when global demand plummeted by 15-20%. Since then, although global demand has reached record levels, OPEC has lost market share to competitors. Historically, OPEC produced about half of the global crude in the 1970s, but with the emergence of non-OPEC supply sources like the North Sea, its share has been diminishing. In recent decades, OPEC's share has fluctuated between 30% and 40%, but has faced competition from record output growth in countries like the United States.

As of November 2023, OPEC's crude oil output accounted for 27.4% of the total market, down from 32-33% in 2017-2018. OPEC, established in 1960 by Saudi Arabia, Kuwait, Venezuela, Iran, and Iraq, has expanded over the years, with Angola joining in 2007. Since 2017, OPEC has collaborated with Russia and other non-members in the OPEC+ group to manage the market. OPEC+ is currently reducing production by around 6 million barrels per day, indicating the potential to increase output to regain market share, though this could lead to a significant drop in oil prices if demand does not improve.

Projections from prominent oil forecasters like the International Energy Agency, the U.S. Energy Information Administration, and OPEC itself suggest limited scope for reducing these production cuts in the near future. However, OPEC anticipates an increase in its market share in the long term, with a prediction of its total share of the oil market rising to 40% by 2045 as non-OPEC output begins to decline from the early 2030s.

Source : Reuters (Reporting by Alex Lawler)