Summer Oil Market Outlook - OPEC Featured Article 4/13/2023
In 1Q23, world oil demand is estimated to have grown by a healthy 2.1 mb/d y-o-y, on the back of a strong rebound in China’s oil demand, as well as solid oil demand data in other non-OECD regions, particularly the Middle East and Asia. Looking ahead, world oil demand is expected to grow by around 2.4 mb/d y-o-y in 2Q23, 2.5 mb/d y-o-y in 3Q23 and 2.3 mb/d y-o-y in 4Q23.
In terms of products, global demand for gasoline and diesel is forecast to increase by 0.6 mb/d and 0.5 mb/d, y-o-y, respectively, in 2Q23. In 3Q23, demand for these two products is forecast to improve further, with global gasoline demand growth forecast at 0.7 mb/d and diesel at 0.6 mb/d, y-o-y.
In the OECD, heightened mobility in the upcoming driving season in the US is expected to provide the usual additional demand for transportation fuels. However, any weakening in the economy on the back of ongoing monetary tightening measures by the US Fed may offset some of this seasonal dynamic. Overall, OECD Americas is forecast to lead demand growth in the region at an average of around 160 tb/d y-o-y in 2Q23 and 3Q23. The demand in OECD Europe is likely to continue to be challenged, amid slowing economic activity, leading to a slight projected y-o-y decline in 2Q23 and 3Q23 on average. OECD Asia Pacific is expected to show y-o-y growth of around 50 tb/d on average over 2Q23 and 3Q23.
In the non-OECD countries, China is projected to drive oil demand, supported by a pickup in mobility and industrial activity, growing by almost 1.0 mb/d y-o-y in 2Q23 and 0.8 mb/d y-o-y in 3Q23. Similarly, India oil demand is forecast to grow by 0.3 mb/d y-o-y, on average over 2Q23 and 3Q23. Other Asia and the Middle East are also expected to see healthy growth of between 0.3 mb/d-0.4 mb/d on average over 2Q23-3Q23, with requirements for air-conditioning in the summer months adding additional support.
It should be noted that potential challenges to global economic development include high inflation, monetary tightening, stability of financial markets and high sovereign, corporate and private debt levels.
On the refining side, intakes have been on a declining trend since the post pandemic high level seen in November 2022 at 80.8 mb/d. In addition, the start of heavy refinery maintenance around February further weighed on intakes in recent months with some 2.1 mb/d of capacity offline in February and 400 tb/d in March. Although US refiners have recently started returning online, ongoing strikes in France, and impending peak refinery maintenance in Asia are likely to keep intakes suppressed in the weeks ahead. Moreover, the impact of the recent reopening of China has still not been sufficient to reverse the declining trend in global refinery intakes.
On inventories, OECD commercial inventories have been building in recent months, and product balances are less tight than seen at the same time a year ago.
Given these uncertainties surrounding current oil market dynamics, several countries in the Declaration of Cooperation (DoC) have announced additional voluntary adjustments as of May 2023 and until the end of the year, and this was in support of the ongoing relentless and determined DoC effort to support the stability of the oil market.
Mrs. Smith
