The Organization of Petroleum Exporting Countries has released its first estimates for global oil demand growth in 2023. While the group expects global oil demand to grow by about 3 million barrels per day in 2023, its growth forecast is slower than it was for 2022. The organization still anticipates global oil demand to hit a record high of about 103 million barrels per day in 2023. However, its forecast is based on optimistic assumptions about economic growth and that China will continue to overcome its Covid restrictions.
OPEC is monitoring the effects of global demand destruction, which is reducing the global supply of oil. Although the group has pledged to return output to pre-pandemic levels by August, the increase in demand has not been sufficient for some consuming countries. Moreover, the United States has repeatedly urged the producer group to supply more crude oil. US President Joe Biden is scheduled to visit Saudi Arabia in July, where he will meet with leaders of the Persian Gulf. During the visit, he is expected to discuss the state of the global oil market. Meanwhile, OPEC estimates that global oil demand will grow by about two million bpd in 2023, despite non-OPEC production growing by about two million bpd.
The OPEC forecasts are subject to uncertainty, including the course of the pandemic virus, the level of global financial tightening and the resolution of geo-political problems in Eastern Europe. Moreover, the IEA, a research body that advises the Western governments on energy policy, is preparing its first forecast for 2023 on Wednesday. There are several factors influencing the forecast of oil demand, including the course of global financial tightening, growing inflation, and the resolution of geo-political issues in Eastern Europe.
The OPEC+ production cuts were reversed in 2020 and the alliance has not met previous quotas. As a result, the surplus capacity has decreased. OPEC has not met its quotas in the past two years and the surplus capacity has declined from 2021 to 2022, according to the US Energy Information Administration. In addition, the wider 23-country alliance, OPEC+, hasn’t met its quotas either.
Despite the shaky economic outlook in China, OPEC still expects non-OPEC oil production to rise 1.1 million barrels per day. The biggest portion of the growth will come from the Permian Basin tight oil formations, while Brazil, Norway, and Guyana are also expected to add 1.1 million barrels per day in 2023. However, OPEC sees U.S. liquids production growing at 1.1 million barrels per day in 2023, mainly from unconventional oil fields and non-conventional natural gas liquids.
In a report published last week, OPEC and its allies said that global oil demand will grow at a slower pace in 2023. While a slower rate than originally expected, the report does warn of a tightening oil market in the coming years. The report also noted that global economic growth in 2023 will be below OPEC’s forecast.