The results of the upcoming presidential election in the US is anticipated to reshape concerns about a potential supply surplus in the oil market, which arose following the International Energy Agency's (IEA) forecast that global oil demand growth will slow this year.
Kate Dourian, a non-resident fellow at the Arab Gulf States Institute in Washington, told Anadolu that regardless of who is elected president on November 5, the results will affect future global oil demand.
If the Republican Party's presidential candidate Donald Trump is victorious at the polls, Dourian says investments in renewable energy could decline.
She also noted that a Republican victory might slow down renewable energy growth in the country, leading to a reduction in environmental policies, which in turn could increase the use of oil and natural gas in the US.
Potential changes in the US economic growth following the election could impact demand in the world's largest crude oil consumer, which might influence oil prices, she said.
Dourian said this situation could also affect major crude producer Saudi Arabia's oil output, as the country strives to balance supply and demand in the global oil market.
'These effects would not be immediate because new investment decisions would take time to impact oil and clean energy output and US energy companies would likely determine their strategies based on economics rather than government policy,' Dourian said.
Emphasizing that the increase in US oil production in recent years is one of the reasons behind the production cuts implemented by Saudi Arabia under the OPEC+ agreement, Dourian suggested that if US production rises to a level that impacts global balances, an increase in surplus production could exert pressure on prices, leading to potential competition for market share.
- Daily global demand growth could fall below 1 million barrels
The IEA and OPEC have differing assessments regarding global oil demand growth, though both made downward revisions in their monthly reports.
According to the IEA's World Energy Outlook 2024 report, global oil demand growth is expected to slow significantly this year, remaining below 1 million barrels per day (bpd).
In the 'Stated Policies Scenario,' the agency forecast that oil demand will remain unchanged from last year's World Energy Outlook report for the years 2023-2035, with a peak of just below 102 million bpd expected before 2030.
Also, it estimates that demand will decline to 99 million bpd by 2035, with a total decrease of approximately 6 million bpd by 2050 compared to 2023.
According to the scenario, the drop in oil demand will be led by the transportation sector.
In October, OPEC lowered its growth forecast for the year to below 2 million bpd, while the IEA expects this growth to be under 1 million bpd.
If the IEA's forecast proves accurate, it will become more challenging for the OPEC+ group to increase production in December, especially with the return of voluntary cuts of 2.2 million bpd to the market, Dourian noted saying that this situation would be further complicated if oil prices remain at current levels.
- China leads demand fall
'The key is China and the impact of a slowing Chinese economy on oil demand growth. Combined with non-OPEC+ supply growth, estimated by the IEA at 1.5 million bpd this year led by the Americas, it leaves little room for the OPEC+ to maneuver,' Dourian said.
'It will also mean Saudi Arabia will be focusing on compliance with quotas to ensure there is space for additional supply from its members without tipping balances into negative territory,' she added.
Dourian pointed out that China imported 11.1 million bpd in September, but this amount has decreased over the past five months citing that if this trend represents a structural decline, it could significantly impact oil balances.
Underlining IEA's prediction for a demand decline in China, reflecting a drop from an average of 17.4 million bpd in 2030 to 11.8 million bpd by 2050, Dourian said that India's demand is projected to increase in both OPEC and IEA scenarios; however, this growth will not be sufficient to offset the demand loss from China.
Dourian emphasized that this situation would lay the groundwork for increased competition among exporters in the Asian market in the long term and noted that Russia and Iran benefit from offering discounted prices to China and India.
However, she pointed out that Gulf countries would remain in a favorable position due to their ability to produce the lowest-cost and least carbon-intensive oil, even if demand decreases in the long run.
By Duygu Alhan
Anadolu Agency
energy@aa.com.tr