The Organization of the Petroleum Exporting Countries (OPEC) has decided to keep its global oil demand expectations unchanged for both this year and the next. However, it has revised its global economic growth forecast for 2023, while grappling with the ongoing decline in oil prices that the organization has been unable to stabilize.
Oil Demand Outlook
According to OPEC’s monthly oil market report, the cartel predicts a daily growth of 2.2 million barrels in oil demand for next year, in line with its previous estimates. Additionally, its forecast for 2023 remains steady at 2.5 million barrels per day.
Key Growth Drivers
OPEC specifically highlighted China’s economic recovery as a significant factor driving demand growth in 2023, along with higher-than-expected growth in the Americas. The organization also expects a gradual recovery in European demand after experiencing contraction this year due to weak manufacturing and petrochemical activity. Nevertheless, it does not anticipate oil demand in OECD countries surpassing the levels seen in 2019.
OPEC’s Outlook for 2024
Looking ahead to the end of 2023, the OPEC Secretariat cautiously expresses optimism regarding the fundamental factors influencing oil market dynamics in 2024.
Falling Oil Prices
Brent crude, the international benchmark, has experienced a continuous decline over the past seven weeks. After reaching nearly $100 per barrel in late September, it has now dropped to $73. Similarly, WTI, the U.S. oil gauge, has fallen back below $70 per barrel, hitting its lowest point since late June.
OPEC attributes this decline to “exaggerated” concerns about oil-demand growth and notes that the futures market has witnessed considerable selloffs amidst high volatility.
To address these challenges and support prices, OPEC and its allies recently agreed to implement voluntary output cuts of approximately 2.2 million barrels per day during the first quarter of next year.
Even in the face of falling prices, OPEC remains determined to navigate the uncertainties in the market and achieve stability while monitoring global economic developments and oil demand trends.
OPEC Announces Voluntary Cuts, Raising Concerns over Market Oversupply
Oil prices plummeted after the recent announcement from the Organization of the Petroleum Exporting Countries (OPEC), which raised concerns over compliance with voluntary production cuts. The prospect of a potential market oversupply in the near-to-medium term has sparked worries among industry experts. As a result of this announcement, oil prices have seen a sharp decrease, wiping out all the gains made since the Israel-Hamas conflict erupted in October. Currently, oil prices are down nearly 10% this month.
OPEC Reaffirms Non-OPEC Supply Growth Forecast
Despite the concerns surrounding compliance, OPEC has maintained its non-OPEC supply growth forecast for the coming years. The group projects a growth of 1.8 million barrels a day for 2023 and 1.4 million barrels a day for 2024, largely driven by the increasing production in the United States.
Global Economic Growth Forecast Revised
In light of better-than-expected economic growth in most major economies during the first nine months of this year, OPEC has revised its global economic growth forecast for 2023. The forecast has been raised to 2.9% from the previous estimate of 2.8%. However, the forecast for 2024 remains unchanged at 2.6%.
U.S. Economic-Growth Estimates Increase
OPEC has also revised its estimates for U.S. economic growth, forecasting a rate of 2.4% for 2023 and 1% for 2024, indicating an optimistic outlook for the American economy in the coming years.
OPEC Reports Decline in Crude Output, Saudi Arabia Increases Production
According to secondary sources cited by OPEC, crude oil output from the organization decreased by 57,000 barrels a day in November compared to October levels, settling at 27.84 million barrels a day. Meanwhile, Saudi Arabia recorded a slight increase in production, with an additional 12,000 barrels a day, bringing the kingdom’s total output to 8.99 million barrels a day in November. On the other hand, both Iraq and Angola saw a decrease in production by 77,000 barrels a day and 37,000 barrels a day, respectively. The new production levels for these countries stand at 4.28 million barrels a day for Iraq and 1.13 million barrels a day for Angola.
International Energy Agency to Release Monthly Report
Further insights into the energy market are expected with the forthcoming release of the International Energy Agency’s monthly report, scheduled for Thursday.
