Opec lowers oil demand forecast for rest of 2023

Opec has lowered its global oil demand forecast for the rest of the year by a cumulative 300,000 b/d, although an upward revision to its first quarter estimate leaves its overall growth forecast for 2023 largely unchanged.

In its latest Monthly Oil Market Report (MOMR), Opec bumped up its demand estimate for the first quarter by 270,000 b/d compared with its previous report. The upwards revision was led by China, the Middle East and Latin America. But it lowered its estimates for each of the following quarters, leaving its demand growth forecast for the full year unchanged at 2.3mn b/d. The group sees total oil demand for 2023 at 101.9mn b/d.

The quarterly adjustments would appear to align with the decision by several core members of the Opec+ alliance to implement additional voluntary output cuts of almost 1.2mn b/d from May until the end of the year. Opec also cited "uncertainties surrounding current oil market dynamics" as a key reason for the announced cuts.

The report highlights building OECD commercial inventories in recent months, implying a healthier supply picture than previously imagined. But the MOMR also cites several uncertainties related to global economic growth that could affect oil demand in the coming months. These include "high inflation, monetary tightening, stability of financial markets and high sovereign, corporate and private debt levels."

Opec left its projection for non-Opec liquids supply growth unchanged at 1.4mn b/d for 2023, with stronger than anticipated Russian production in the first quarter offsetting declines elsewhere. Still, Opec expects sanctions-hit Russian output to fall by 750,000 b/d to 10.28mn b/d this year, unchanged from last month's report. It estimates total non-Opec liquids supply at 67.2mn b/d for 2023.

Opec has left the call on its members' crude for this year unchanged at 29.26mn b/d, which is higher than its March output of 28.94mn b/d as assessed by Argus and of 28.80mn b/d as assessed by secondary sources, which include Argus. Production should fall from May, when Saudi Arabia, Iraq, Kuwait, the UAE, Algeria and Gabon take more than 1mn b/d between them off the market as part of the voluntary cuts.

By Aydin Calik