EIA Forecast World Oil Consumption to Overtake Production This Year with Russia and KSA Cuts

In the July STEO, EIA forecast that world oil consumption will overtake production this year, this reverses earlier forecasts. The EIA 2023 world oil demand growth forecast was raised by 170kbpd to 1.76mbpd Y/Y,
however, the 2024 forecast demand cut by 60kbpd to a 1.64mbpd Y/Y. A small drop in oil production from OPEC+ alliances with the extension of production cuts and those outside of them will trim global supply to 101.1mbpd a day, just short of demand. EIA sees US crude oil production rising 57kbpd to 12.56mln BPD in 2023 (prev. 78k BPD rise). EIA expects Brent crude oil prices to reach USD 80/bbl in Q4 ’23.

The EIA forecast global liquid fuels consumption increases by 1.8 million barrels per day (b/d) in 2023 and by 1.6 million b/d in 2024.

Oil Price Forecasts

EIA forecast that the Brent crude oil spot price will average $78 per barrel in July. EIA expect the OPEC+ production cuts and rising demand to increase prices going forward. This down from an average of $101/b in 2022. Crude oil prices gradually increase throughout their forecast, reaching about $80/b in 4Q23 and averaging about $84/b in 2024 because they expect that global oil inventories will decline over the next five quarters.

  • The Brent price averaged $75 per barrel (b) in June, unchanged from May, as ongoing concerns regarding weakening global economic conditions continued to limit expectations for global oil demand growth, which countered upward price pressure from tighter near-term oil supplies.
  • The reduction in expected near-term oil supplies was the result of the OPEC+ extended crude oil production cuts announced on June 4 and an extension of voluntary cuts through August announced by Saudi Arabia on July 3.

STEO Global Oil Consumption Highlights

  • EIA forecasts global liquid fuels consumption increases by 1.8 million barrels per day (b/d) in 2023 and by 1.6 million b/d in 2024.
  • Most of the expected liquid fuels demand growth is in non-OECD Asia, led by China and India.
  • EIA expect China’s liquid fuels consumption will rise by 0.8 million b/d in 2023 and by 0.4 million b/d in 2024.
  • India’s liquid fuels consumption is forecast to rise by an average of 0.3 million b/d in both 2023 and 2024.

STEO Global Oil Production Highlights

  • Global oil inventories will transition from inventory builds, on average, during the first half of 2023 (1H23) to consistent inventory draws until the fourth quarter of 2024 (4Q24).
  • This transition puts upward pressure on global oil prices over the forecast period. Global oil inventories increased by an average of 0.6 million b/d in 1H23, and EIA forecast they will decrease by an average of 0.7 million b/d in 2H23. Inventories continue to fall by an average of 0.4 million b/d in the first three quarters of 2024 before increasing by 0.1 million b/d in 4Q24.
  • EIA forecast global liquid fuels production will increase by 1.2 million b/d in 2023, primarily because of growth from non-OPEC producers such as the United States, Norway, Canada, Brazil, and Guyana. This growth offsets reduced production in Russia and OPEC.
  • EIA expect Russia’s production will decline between 0.2 million b/d and 0.3 million b/d on average this year.
  • EIA forecast that total OPEC liquid fuels production will fall by 0.6 million b/d in 2023, primarily because of the extended production cuts announced on June 4 by OPEC+ and voluntary cuts by Saudi Arabia.
  • On July 3, Saudi Arabia announced it was extending voluntary cuts through August. Global liquid fuels production increases by an additional 1.5 million b/d in 2024 led by growth in OPEC production.
  • Overall, EIA forecast total OPEC liquid fuels production to increase by 0.5 million b/d in 2024.
  • In 2021 and 2022, more than half of the increase in production of liquid fuels globally occurred in member countries of the Organization of the Petroleum Exporting Countries, or OPEC. EIA expect that percentage to shift in 2023 and 2024 when non-OPEC countries will account for more production growth as a number of long-term development projects come online.
  • Forecast remains uncertain as a number of factors, including global economic growth, Russia’s production, and possible delays in expected project start-up dates could affect the production outlook.

Russia and other countries add uncertainty to non-OPEC production forecast

EIA anticipate heightened uncertainty around forecasts. They assume Russia will be able to reroute some of its petroleum exports subject to EU sanctions. This assumption involves the willingness for other countries to continue to buy Russia’s exports and the continued availability of tanker capacity to transport Russian petroleum.

EIA warns oil production in other non-OPEC countries may be affected by increasing macroeconomic risks around the global banking sector and the access to capital, as well as the potential for delay or disruption to the startup of expected oil projects, including those impacted by environmental, social, and governance concerns.

Source: EIA

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