Opec maintains 2023 demand forecast despite economic headwinds

Group expects healthy oil market fundamentals in second half amid output cuts

In the OECD region, oil demand in 2023 is forecast to rise by 74,000 barrels per day to an average of 46 million bpd. Bloomberg
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Opec has maintained its outlook for oil demand this year and expects healthy oil fundamentals in the second half as the global economy continues to recover from the coronavirus pandemic.

World oil demand is projected to rise by 2.4 million barrels per day to an average of 102 million bpd, unchanged from last month’s estimate, Opec said in its monthly oil market report on Thursday.

“Prospects for healthy oil fundamentals in the second half of the year, along with the pre-emptive, proactive and precautious approach of Opec and non-Opec producing countries to assess market conditions and take necessary measures at any time and as needed, will ensure stability of the global oil market,” Opec said.

Earlier this month, the Opec+ alliance of 23 oil-producing countries agreed to stick to its current output policy, as the group’s production cuts tightened supply and pushed oil prices higher.

The decision came a day after Saudi Arabia, the world's largest oil exporter, said it would extend its voluntary oil production cut of one million bpd until September.

Oil prices recorded their biggest monthly gain since early 2022 in July amid falling crude inventories and Opec+ supply cuts, as cooling inflation eases concerns of aggressive interest rate increases by central banks.

In the OECD (Organisation for Economic Co-operation and Development) region, oil demand in 2023 is forecast to rise by 74,000 bpd to an average of 46 million bpd, it said in the report.

OECD Americas’ demand is predicted to have the largest regional rise in 2023, led by the US, on the back of recovering jet fuel demand and improvements in gasoline requirements.

In the non-OECD region, total oil demand is expected to rise by nearly 2.4 million bpd to an average of 56 million bpd in 2023.

A steady increase in transportation and industrial fuel demand, supported by a recovery in activity in China, the world’s second-largest economy and other non-OECD regions, is projected to boost demand in 2023.

In 2024, “solid global economic growth” amid continued improvements in China is expected to boost the consumption of oil.

World oil demand is anticipated to rise by 2.2 million bpd year-on-year, unchanged from the previous assessment, with total world oil demand projected to average 104.3 million bpd.

The non-OECD is set to drive growth, increasing by around 2 million bpd, with China, the Middle East and Other Asia contributing the largest share, with further support from India, Latin America, and Africa.

“China and India are anticipated to see the largest growth by country. Other regions, particularly the Middle East and Other Asia, are also expected to see considerable gains, supported by a positive economic outlook,” Opec said in the report.

Last month, the International Monetary Fund revised its earlier forecast for this year upwards, raising it by 0.2 percentage points to 3 per cent, although lower than the 3.5 per cent expansion recorded in 2022. It is projecting a similar pace of growth in 2024.

Despite the positive developments, “many challenges still cloud the horizon, and it is too early to celebrate”, said IMF chief economist Pierre-Olivier Gourinchas.

Goldman Sachs has reaffirmed its Brent forecast of $86 a barrel by December and expects prices to rise to $93 in the second quarter of 2024. The investment bank also raised its 2023 oil demand estimate by 550,000 bpd.

Brent, the benchmark for two thirds of the world’s oil, was trading 0.45 per cent lower at $87.13 a barrel at 5.31pm UAE time on Thursday.

West Texas Intermediate, the gauge that tracks US crude, was down 0.70 per cent at $83.81 a barrel.

Production from Opec members declined by 836,000 barrels a day in July amid production cuts by Saudi Arabia and other member countries, data from the latest report shows.

Updated: August 10, 2023, 2:30 PM