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Thursday, 07/14/2022 11:57:39 PM

Thursday, July 14, 2022 11:57:39 PM

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The Outlook For The Oil Market In 2023 - OPEC Featured Article, Released July 14, 2022

OECD Composite Leading Indicators News Release, Paris, July 11, 2022: https://www.oecd.org/sdd/leading-indicators/composite-leading-indicators-cli-oecd-07-2022.pdf

FEATURED ARTICLE: The outlook for the oil market in 2023

World GDP growth in 2023 is forecast at 3.2%. This assumes that the ramifications of the pandemic, geo-political developments in Eastern Europe and global financial tightening amid rising inflation do not negatively impact the 2023 growth dynamic to a major degree. It also assumes that major economies revert back towards their growth potentials. However, downside risk exists. Global inflation continues to be a major concern, along with the consequence of further monetary tightening measures by key central banks. The continuation of the pandemic into 2023 is another risk that could curb growth depending on the extent of measures taken to reduce contagion. While labour markets are forecast to remain tight, supply chain bottlenecks may not be resolved in the short term and high debt levels across the globe may persist. In the OECD, GDP growth is expected at 2.1% in 2023, from 2.9% in 2022. In the non-OECD, 2023 GDP growth is forecast at 4.2%, compared to 3.9% in 2022.

Better-than-expected containment of COVID-19 and expected firm global economic growth are projected to support global oil demand in 2023, which is forecast to grow by 2.7mb/d y-o-y. Within the regions, OECD oil demand is forecast to rise by 0.6 mb/d and non-OECD oil demand is projected to show an increase of 2.1 mb/d, mostly in China and India. This is supported by a recovery in transportation fuels and firm industrial fuels demand, including petrochemical feedstock.

In terms of fuels, gasoline and diesel are expected to lead oil demand growth in 2023, on increasing mobility in major consuming countries, such as the US, China and India. Both on-road diesel, including trucking, as well as increasing industrial, construction and agricultural activities in OECD America, Europe and China will support diesel demand. Light distillates will be supported by capacity additions – NGL plants in the US, Propane Dehydrogenation (PDH) plants in China, and steady petrochemical margins. Jet fuel will continue to recover, as domestic and international air travel pick up, but business travel is expected to continue to lag. Uncertainties remain, including COVID-19-related challenges, particularly in China, as well as geopolitical uncertainties and their impact on oil demand.

Non-OPEC oil supply is forecast to grow by 1.7 mb/d y-o-y in 2023, supported by stronger demand. Upstream investment in non-OPEC countries is expected at around $415 billion (bn), broadly the same level as in 2022 and 18% more than in 2021. However, this level is still only half of the $755 billion seen back in 2014. New production by projects sanctioned up to 2023 is forecast at around 19.7 mb/d, up by 10% compared to the 17.8 mb/d seen in 2022. Liquids production growth in the US is forecast at 1.1 mb/d, mainly from US Permian crude and non-conventional NGLs, as well as from the Gulf of Mexico. Oil production in Norway, Brazil, Guyana, Kazakhstan, and Argentina is forecast to increase through new field start-ups and ramp-ups of existing projects. Moreover, non-OPEC processing gains and OPEC NGLs are forecast to grow by 70 tb/d and 50 tb/d, respectively, y-o-y.

Looking ahead to 2023, strong world oil demand growth, along with the increase in non-OPEC supply, are forecast to lead to demand for OPEC crude to increase by 0.9 mb/d y-o-y to average 30.1 mb/d. Nevertheless, uncertainty to the forecast remain to the downside, with much depending on the course of the pandemic and related measures, global financial tightening in the light of growing inflation, and the resolution of the ongoing geo-political issues in Eastern Europe.
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