Tatyana Edovina on the limits of objectivity in forecasting the future oil market

The publication of forecasts for the development of the oil market makes it possible to identify not random, but stable discrepancies in analysts’ estimates – to do this, it is enough to compare the monthly reports of the three most well-known organizations – OPEC (representing the cartel member countries), the International Energy Agency (IEA, only OECD countries can become its members , and these are mainly net importers of oil) and the US Energy Information Administration (EIA).

As analysis by the International Energy Forum shows, the main difference concerns the degree of optimism regarding global oil demand and its prospects (here the differences are noticeable not only in the short-term, but also in the long-term forecasts). The IEA, which advocates increasing energy efficiency and maximizing the acceleration of the energy transition by increasing the share of renewable energy sources, expects that the peak of demand will be passed before 2030. OPEC, on the contrary, gives higher estimates: for example, for this year demand forecasts differ by about 1% – the IEA expects growth of only 1.2 million bpd – in the latest report on the oil market, the organization indicated that consumption will decline The overall slowdown in global economic growth, the exhaustion of the post-Covid recovery, as well as the growing popularity of electric vehicles and increased energy efficiency are having an impact. OPEC expects an increase of 2.2 million bpd – this is comparable to the increase in 2023, when China was still recovering from the factor of increased demand due to the boom in domestic tourism after the lifting of restrictions. The EIA gives an estimate close to the IEA—1.4 million b/d. The next year the discrepancy is even greater – by 2.5 million bpd, this is equivalent to the level of the entire current consumption of South Korea or Canada.

More positive assessments of demand also lead to higher OPEC expectations for demand for oil from the cartel countries – forecasters, on the contrary, are quite unanimous in estimates of production in other countries – the main variability was previously given by the prospects for shale oil production in the United States and the possibility of lifting the oil embargo from Iran – now both scenarios are characterized by significantly greater predictability (although Iran, based on the results of last year, increased supplies to the maximum in five years).

Discrepancies, however, can also be retrospective – for example, for last year, forecasters even disagree in their estimates of oil reserves – whether they increased or decreased. The spread of estimates at the end of the year turned out to be three times higher than a year earlier (1.3 million b/d versus 0.4 million b/d). For the fourth quarter, where the data is still forecast, estimates differ by 2.6 million b/d, for the first – by 0.9 million b/d. This is likely a consequence not only of the peculiarities of data calculation, but also of complications in access to objective information – including against the background of the effect of the ceiling on Russian oil and the increasing share of gray supplies.