The Organization of the Petroleum Exporting Countries (OPEC) has revised its expectations for global oil demand, stating that the weak sentiment is exaggerated and the economy is more resilient than initially thought. According to OPEC's monthly oil-market report, oil demand is projected to increase by 2.5 million barrels a day this year, up by 100,000 barrels a day from the previous month's report.
OPEC emphasizes that the fundamentals of the global oil market remain strong and that negative sentiment surrounding demand is overstated. Recent data confirms robust growth trends and healthy oil market fundamentals, according to the cartel.
The main reasons behind the more positive sentiment are stronger-than-expected growth in the United States and China. OPEC has raised its U.S. economic growth forecast for 2023 to 2.3% from 2% and for 2024 to 0.9% from 0.7%. Chinese demand is described as "healthy," with crude imports 240,000 barrels a day higher than in September.
OPEC maintains its demand forecast for 2024 at 2.2 million barrels a day.
Furthermore, OPEC has increased its non-OPEC supply forecast for 2023 by 100,000 barrels a day to 1.8 million barrels a day, while keeping its 2024 forecast unchanged at 1.4 million barrels a day.
The production from OPEC itself continues to rise, with October's output reaching 27.9 million barrels a day according to secondary sources, an increase of 80,000 barrels a day compared to September. OPEC has also revised September's output level to 27.82 million barrels a day from the previous estimate of 27.75 million barrels a day.
During the third quarter of 2023, OPEC estimates that the market experienced a deficit of one million barrels a day. To balance the market, OPEC expects its supply to reach 29.08 million barrels a day, while non-OPEC sources are projected to produce 73.03 million barrels a day this year.
Oil Prices and Production: An Overview
Saudi Arabia and Russia have taken steps this year to support oil prices by cutting production. Saudi Arabia, the de facto leader of the cartel, has announced its intention to reduce production by 1 million barrels a day until the end of the year. Similarly, Russia is committed to lowering output by 300,000 barrels a day until the end of December. The future of production will be discussed at the upcoming OPEC+ meeting scheduled for November 26.
When the Israel-Hamas war broke out, oil prices surged on fears that the conflict would impact the wider Middle Eastern region. On October 19, the price of Brent crude reached a peak of $92.38 per barrel. However, prices have since declined and are currently trading at $81.70 per barrel as of Monday.
According to OPEC, if October's production levels were to continue throughout December, it would result in a deficit of 3 million barrels per day for the fourth quarter.
Meanwhile, Iran's oil output witnessed a notable increase in October, with a rise of 46,000 barrels per day and a total daily output of 3.12 million barrels. This rise in production has caught the attention of analysts due to the potential tightening of sanctions on Iran following the Israel-Hamas conflict. Hamas, recognized as a terrorist organization by the U.S., has maintained a longstanding relationship with Iran.
Angola experienced a production growth of 51,000 barrels per day, reaching a daily output of 1.17 million barrels. On the other hand, Saudi Arabia observed a decrease in output by 26,000 barrels per day, resulting in a daily production of 8.99 million barrels, as reported by OPEC based on secondary sources.
The International Energy Agency is scheduled to release its monthly report, providing additional insights into the oil market, on Tuesday.
