The Organization of the Petroleum Exporting Countries (OPEC) has raised its projections for world oil demand in its latest World Oil Outlook published on Tuesday.

The cartel sees oil demand rising to 118.9 million barrels per day (bpd) by 2045, 2.9 million bpd higher than it predicted in the previous year. The outlook also expects demand to hit 120.1 million bpd by 2050.

“Future energy demand is found in the developing world due to increasing populations, middle class and urbanization,” said OPEC Secretary General Haitham Al Ghais during the report’s launch in Brazil.

On investment, the organization said the oil industry needs $17.4 trillion through 2050 to further expand production and sustain the sector.

“All policymakers and stakeholders need to work together to ensure a long-term investment-friendly climate,” Al Ghais wrote.

OPEC also increased its medium-term demand projection on a stronger economy than last year and easing inflationary pressure.

According to OPEC, world oil demand will rise to 111 million bpd and 112.3 in 2028 and 2029, respectively. While the 2028 figure is up 800,000 bpd from last year’s prediction, 2029 forecast is over 6 million bpd higher than that of the IEA, which said in June demand will plateau in 2029 at 105.6 million bpd.

The gap is larger than the combined output of OPEC members Kuwait and the United Arab Emirates.

In 2020, OPEC made a shift when the pandemic hit oil demand, saying consumption would plateau in the late 2030s. It has begun raising forecasts again as oil use has recovered.

By 2050, there will be 2.9 billion vehicles on the road, up 1.2 billion from 2023, OPEC forecast. Despite electric vehicle growth, vehicles powered by a combustion engine will account for more than 70% of the global fleet in 2050, the report said.

“Electric vehicles are poised for a larger market share, but obstacles remain, such as electricity grids, battery manufacturing capacity and access to critical minerals,” it said.

Global oil prices appreciated slightly on Monday during the Asian trading session, following last week’s interest rate cut in the United States and a decline in crude oil inventories.

Brent crude oil, against which Nigerian crude oil is priced, appreciated by 14 cents, or 0.19%, to $74.63 per barrel, while U.S. West Texas Intermediate (WTI) crude oil gained 16 cents, or 0.23%, to $71.16 per barrel.

Both crude oils traded higher last week after the U.S. Federal Reserve cut interest rates by half a percentage point.

“Oil looks rangebound despite the uplift to risky asset prices from an outsized policy rate cut by the Fed last week,” said Harry Tchilinguirian, head of research at Onyx Capital Group.

“The market will look to flash purchasing managers’ index (PMI) releases in Europe and the U.S. for economic direction, and if these disappoint, then there is likely to be downward pressure developing on oil prices.”

In the Euro area, a recent survey showed business activity declined due to stagnant growth in the services industry and a slowing manufacturing sector.

Meanwhile, China’s economic outlook remained subdued with growth continuing to lag.

“There was some hope earlier this morning that additional Chinese monetary stimulus might be likely in the short term, but the latest PMI data out of Europe shifted market sentiment from positive to negative,” said UBS analyst Giovanni Staunovo.

“I would expect oil to benefit this week from a large U.S. crude draw as a result of elevated U.S. crude exports.”

However, heightened conflict in the Middle East could limit regional supply.

The Israeli military launched its most widespread wave of airstrikes against Iran-backed Hezbollah, targeting southern Lebanon, the eastern Bekaa Valley, and the northern region near Syria simultaneously after nearly a year of conflict.

“Geopolitical tensions in the Middle East have edged up between Israel and Hezbollah, which could leave oil prices well supported on the risks of a wider regional conflict,” said IG market strategist Yeap Jun Rong.

Crude gained on Tuesday following Hurricane Francine disruption in the U.S. and the possibility of an interest rate cut in the U.S.

These two factors have boosted traders’ sentiment in the oil market despite concerns about global demand and slowing growth in China.

Brent crude oil, against which Nigerian oil is priced, rose by 36 cents, or 0.5% to $73.11 per barrel while the U.S. crude oil gained 53 cents, or 0.8% to settle $70.62 per barrel.

Both closed higher in the previous trading session as the market reacted to the impact of Hurricane Francine on U.S. Gulf Coast production.

More than 12% of crude oil production and 16% of natural gas output in the Gulf of Mexico remained offline as of Monday, according to the U.S.

According to the Bureau of Safety and Environmental Enforcement (BSEE), the disruption has raised concerns over short-term supply shortages and contribution to the upward momentum in prices.

Yeap Jun Rong, a market strategist at IG said “while the market is seeing near-term stabilization, the fragile state of China’s economy and anticipation of the U.S. Federal Reserve’s interest rate decision could limit further gains.”

The Federal Open Market Committee (FOMC) is expected to announce a rate cut later this week, with futures markets pricing in a 69% chance of a 50-basis-point reduction.

Lower interest rates are favourable for oil prices as they reduce borrowing costs and encourage economic growth.

“Growing expectations of an aggressive rate cut are lifting sentiment across the commodities sector”, stated ANZ analysts.

The market, however, remains cautious due to lower-than-expected demand from China, the world’s largest importer of the commodity.

Chinese data released over the weekend showed that China’s oil refinery output dropped for the fifth consecutive month in August. This signals weaker domestic demand and declining export margins.