Opec has made another cut to its global oil demand growth forecast, trimming around 100,000 b/d from its projections for both 2022 and 2023.
This year's growth is now pegged at 2.55mn b/d, compared with a previous forecast for 2.64mn b/d. The downgrade is underpinned by the extension of China's zero-Covid restrictions and "some economic challenges in OECD Europe that have weighed on oil demand", Opec said today in its latest Monthly Oil Market Report (MOMR).
The Chinese government last week again reinforced the need to stick with its zero-Covid policy, although it urged more targeted restrictions.
Opec expects global oil demand next year to be supported by the containment of Covid-19 in China and by geopolitical improvements, but it has cut its growth forecast regardless, to 2.24mn b/d from 2.34mn b/d in last month's MOMR. Non-OECD economies account for 1.9mn b/d of the growth in 2023, led by China and India. In the OECD, Opec forecasts US oil demand to climb above pre-pandemic levels next year, but projects consumption in OECD Europe and Asia-Pacific to remain below 2019 levels.
Opec has cut its 2022 forecast for oil supply growth from non-Opec producers by 30,000 b/d to 1.9mn b/d, with upwards revisions for Russia and Latin America more than offset by downgrades elsewhere, notably in Azerbaijan, Kazakhstan and in Europe where extended maintenance in the North Sea reduced output in the third quarter.
"It should be noted, however, that considerable uncertainty remains with regard to Russia's liquids output in [the fourth quarter of 2022]," Opec said.
Non-Opec supply is projected to increase by 1.54mn b/d in 2023, which is 20,000 b/d higher than last month's forecast. Opec sees the US, Norway, Brazil, Canada, Kazakhstan and Guyana as the main growth drivers, and it expects production to decline in Russia and Mexico. The major uncertainties weighing over non-Opec supply next year are US shale output potential and how the geopolitical situation develops in eastern Europe, "particularly the looming EU sanctions on Russian oil imports", Opec said.
Taking into account the supply and demand revisions, Opec has reduced the call on its own members' crude by 100,000 b/d for this year to 28.6mn b/d, and by 200,000 b/d for 2023 to 29.3mn b/d. Opec crude output was 29.74mn b/d in October, according to Argus' estimate.
Based on a review of global oil inventory levels, Opec estimates oil supply outpaced demand by an average 300,000 b/d in the January-September period of this year.
