OPEC 2025 Forecast: What Nigeria can do differently

In the latest OPEC forecast for oil demand in 2025, the oil cartel maintains its forecast for robust growth in global oil demand, predicting a rise of 1.85 million barrels per day (bpd) in 2025 to reach 106.21 million bpd. The forecast for 2024 remains unchanged at a rise of 2.25 million bpd, reflecting OPEC’s confidence in sustained demand growth.

OPEC’s outlook contrasts with the International Energy Agency’s (IEA) prediction that global oil demand will peak by 2030. OPEC emphasizes continued growth over the next two decades. The IEA attributes the anticipated slowdown in oil demand growth to factors such as below-trend economic growth, efficiency improvements, and the rise of electric vehicles.

Despite OPEC’s positive demand forecasts, oil prices have started the year weakly, influenced by market uncertainty regarding demand. OPEC and its allies, known as OPEC+, have implemented supply cuts to support prices. However, the impact has been offset by demand concerns, as reflected in the current Brent crude price of around $77 per barrel.

The OPEC Secretary General Haitham Al Ghais disputes the notion of peak oil demand in the near term, asserting that reliable short- and medium-term forecasts do not indicate such a peak. He emphasizes the need for continued investment in the oil industry, challenging the idea that peak oil demand is imminent.

OPEC’s early release of the 2025 forecast in its monthly report deviates from past practices and is intended to provide long-term guidance to the market. This move indicates OPEC’s proactive approach in shaping market perceptions and understanding of future dynamics. The oil cartel anticipates increased global economic growth in 2025, driven by a rise in oil consumption, particularly in China, the Middle East, and India. The expected boost in demand is attributed to factors such as interest rate cuts, signalling a connection between economic policies and oil consumption patterns.

OPEC’s optimistic outlook on oil demand growth in 2025, its divergence with the IEA, and the ongoing market dynamics underscore the complexities and uncertainties in predicting the future of the global oil market. The interplay between economic factors, geopolitical developments, and the energy transition will continue to shape the trajectory of the oil industry.

What should Nigeria do differently?

OPEC Secretary General Haitham Al Ghais emphasizes the need for continued investment in the oil industry. Nigeria should assess its infrastructure, technology, and human capital to ensure that it can meet the expected increase in oil demand. This might involve attracting foreign investments or encouraging domestic investments in oil exploration, production, and refining.

While OPEC predicts increased global economic growth driven by oil consumption, it is essential for Nigeria to continue efforts to diversify its economy. Over-reliance on oil exports can expose the country to economic vulnerabilities. Diversification into sectors such as agriculture, manufacturing, and services can provide stability in the face of oil market uncertainties.

OPEC’s oil production slightly increased in December 2023, led by Nigeria, rebounding from internal challenges. Geopolitical factors can significantly impact the oil market. Nigeria should closely monitor geopolitical developments that may affect oil prices, such as conflicts in major oil-producing regions or changes in political dynamics that could impact global oil supply and demand.

OPEC’s forecast suggests sustained oil demand growth over the next two decades. However, there is a global trend toward cleaner and more sustainable energy sources. Nigeria should consider incorporating sustainable practices in its oil industry, such as investing in cleaner extraction technologies, reducing environmental impact, and exploring opportunities in renewable energy.

OPEC’s market share has declined, and Nigeria’s production has rebounded. Nigeria should assess its market share strategies, considering factors like production efficiency, cost management, and international partnerships. Collaborating with OPEC+ or other stakeholders to stabilize oil prices and ensure market equilibrium could be beneficial.

Nigeria should actively engage in discussions within OPEC to contribute to decision-making processes. OPEC’s proactive approach in shaping market perceptions indicates the organization’s commitment to influencing the market. Nigeria can use these platforms to voice its concerns, share insights, and contribute to strategies that benefit its interests.

While OPEC disputes the notion of peak oil demand in the near term, the rise of electric vehicles and global efforts toward energy transition cannot be ignored. Nigeria should assess its readiness for potential shifts in the energy landscape and explore opportunities in cleaner energy sources to stay relevant in a changing market.

In other words, Nigeria should balance short-term gains from the optimistic oil demand forecast with long-term strategies that consider diversification, sustainability, geopolitical factors, and active participation in international discussions to secure its position in the evolving global oil market.