The Organization of the Petroleum Exporting Countries has revised down its forecast for global oil demand growth, reducing the projected daily increase from 970,000 barrels to 780,000 barrels.

Crude oil supply from producers outside the OPEC+ alliance is expected to increase by 640,000 barrels per day this year.

Key Developments

Following its departure from OPEC, which freed it from production quotas, the United Arab Emirates saw its crude oil output surge by 80% month-on-month in June, reaching 3.81 million barrels per day.

To escape the constraints of production quotas and independently control the pace of its crude oil sales, the UAE withdrew from OPEC, resulting in an 80% monthly surge in its June crude output.

Data from OPEC shows that this major global oil producer achieved a daily production of 3.81 million barrels in June, an increase of 1.64 million barrels per day compared to May. In February, before the outbreak of conflict, the country's daily crude output was 3.42 million barrels.

This production spike occurred before the recent sharp escalation in tensions. Current shipping disruptions in the Strait of Hormuz have cast a shadow over the prospects for crude production recovery in the Gulf region, marking the most intense round of conflict escalation since the signing of a 60-day temporary ceasefire agreement in mid-June.

The UAE formally exited OPEC in early May. After leaving the organization, Abu Dhabi gained greater autonomy to ramp up production, while also being able to increase infrastructure investment to reduce its export reliance on the Strait of Hormuz. This critical waterway handles about one-fifth of global crude oil trade and is a primary route for Gulf producers to ship crude to Asia.

The International Energy Agency, comprised of Western nations and their allies, stated that the UAE's average daily crude production in June hit a record monthly high of 4.1 million barrels. It also forecasts the country's daily output will climb to 5.2 million barrels by 2027, positioning it as a core source of supply growth from outside the OPEC+ alliance.

On Monday, OPEC once again lowered its global oil demand growth forecast for this year, reducing its projection for the daily increase in global crude demand from the previous 970,000 barrels to 780,000 barrels.

Compared to other institutions, OPEC's forecast remains relatively optimistic. Most analytical agencies believe geopolitical conflict will significantly suppress fuel consumption: the International Energy Agency predicts global crude oil demand will decrease by 1 million barrels per day this year, while the U.S. Energy Information Administration estimates a daily demand contraction of 1.2 million barrels.

OPEC simultaneously raised its demand growth forecast for next year, increasing the projected daily global crude demand increment from a previous estimate of 1.73 million barrels to 1.94 million barrels.

Total crude oil production from OPEC member states increased by 3.05 million barrels per day in June to 22 million barrels. The broader OPEC+ alliance, which includes the UAE, saw its overall daily production rise by approximately 3 million barrels to 36.28 million barrels.

Ahead of the release of this closely watched OPEC monthly report, core OPEC+ producing nations had already reached a decision to once again increase crude production in August, continuing the gradual unwinding of the production cuts implemented in recent years. This decision was made against the backdrop of a brief resumption of shipping through the Strait of Hormuz following the mid-June temporary ceasefire agreement.

However, tensions have now escalated again, with the standoff over control of the waterway intensifying. On Sunday, U.S. forces launched multiple strikes against several Iranian military targets, while the Iranian military fired on commercial vessels transiting the Strait.

In Monday afternoon trading during the European session, the international benchmark Brent crude price surpassed $78 per barrel, while U.S. West Texas Intermediate (WTI) crude hovered around $74 per barrel.