OPEC April Report Lowers Global Oil Demand Forecast

Due to the severe impact of the near closure of the Strait of Hormuz, OPEC's major oil-producing countries have been forced to significantly reduce production and re-plan export routes. The organization lowered its global oil demand forecast in the latest monthly report released on Wednesday.

In April, OPEC's crude oil production fell by 1.73 million barrels per day, dropping to 18.98 million barrels. The expanded OPEC+ alliance's daily production also dropped by 1.74 million barrels, falling to an overall level of 33.19 million barrels.

Despite Saudi Arabia accelerating the transshipment of crude oil to the Red Sea side port of Yanbu, it still cannot offset the impact of the strait blockage. Kuwait and Iraq's production also saw a significant contraction following suit.

On the demand side, OPEC currently estimates that global oil demand growth this year will be 1.17 million barrels/day. This figure is significantly lower than the previously forecasted 1.38 million barrels/day, reflecting the suppression of global consumption due to supply chain turmoil.

Affected by the intersection of tightened supply and geopolitical risks, Brent crude oil is currently fluctuating near $107 per barrel. Negotiations between the US and Iran on the reopening of the strait and the nuclear agreement remain at an impasse, with neither side showing a willingness to compromise.

The UAE officially withdrew from the organization on May 1st, a historic move that has led the market to question the stability of the organization. The UAE had previously made it clear that it desired greater flexibility in oil production and has formally resumed independent production increases since this month.

The sustainability of Saudi Arabia's role as the "regulator" of the global market is being tested. After the UAE's departure, Saudi Arabia has taken on a disproportionately high share in production adjustments, which may exacerbate the imbalance in the internal power structure of the organization. The focus of future market attention will center on the progress of lifting the strait blockade. If the US-Iran negotiations continue to yield no results, the transshipment costs and security risks of the Red Sea route will become the core variables supporting the high operation of oil prices.