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OPEC expects global oil demand to rise in 2023 but at a slower pace than 2022, the producer group said in its first forecast for next year, citing still-robust economic growth and progress in containing COVID-19 in China.
In a monthly report on Tuesday, the Organisation of the Petroleum Exporting Countries (OPEC) said it expects demand to rise by 2.7 million barrels per day (bpd), or 2.7%, in 2023. It left this year’s growth forecast unchanged at 3.36 million bpd.
Oil use has rebounded from the pandemic-induced slump in 2020 and is set to exceed 2019 levels this year. The outlook for 2023 suggests a strain on supplies could persist as growth in non-OPEC output, which has been hit by Russian production losses, is expected to lag the rise in demand.
“In 2023 expectations for healthy global economic growth amidst improvements in geopolitical developments, combined with expected improvements in the containment of COVID-19 in China, are expected to boost consumption of oil,” OPEC said in the report.
OPEC’s demand forecast for 2023 is more optimistic than that of the International Energy Agency, another closely-watched forecaster, as well as initial views from OPEC delegates calling for a steeper slowdown due to high prices.
The 2023 forecasts assume there will be no escalation of the war in Ukraine and that risks such as inflation do not take a heavy toll on global economic growth, OPEC said.
OPEC kept this year’s global economic growth forecast at 3.5% and forecast growth of 3.2% in 2023, adding that uncertainty was skewed to the downside and upside potential was “quite limited”.
Oil held on to an earlier decline after the report was released, trading below $103 a barrel and well off the near-record high of $139 it hit in March.
More oil needed
The supply outlook for 2023 suggests that the market could remain tight.
OPEC expects non-OPEC supply to rise by 1.7 million bpd, lagging demand growth and a slowdown from 2022. As a result, OPEC forecast the world will need 30.1 million bpd in 2023 from its members to balance the market, up 900,000 bpd from 2022.
That could be a stretch, since the group and allies including Russia, known as OPEC+, have been struggling to deliver on pledged output hikes in 2022 to unwind huge output cuts made in 2020.
Spare production capacity in OPEC has been thinned by underinvestment in oilfields by some members. Adding to scepticism on this, Saudi Arabia has been pumping below its OPEC quota despite near-record prices.
OPEC’s report showed the organisation’s output bucked that trend in June, rising by 234,000 bpd to 28.72 million bpd with increases led by Saudi Arabia and the United Arab Emirates.
Even so, Saudi Arabia was assessed by the secondary sources used by OPEC as pumping 10.59 million bpd in June, below its OPEC quota. Saudi Arabia told OPEC it pumped 10.65 million bpd, close to the quota of 10.66 million bpd.
The United States is expected to make the biggest contribution to non-OPEC supply next year although there is no acceleration expected in shale oil growth.
OPEC expects supply of US tight oil, another term for shale, to rise by 710,000 bpd in 2023, a slowdown from 880,000 bpd in 2022, despite high prices that in previous years have encouraged faster growth.
