Oil Market Snapshot – December 2023

  • Red Sea shipping disruption due to escalating Houthi attacks leads to Brent prices surging above $80/bbl, with potential for further increases.
  • Future market volatility expected amid the ongoing Russia-Ukraine war, Israel-Hamas escalation, and China's economic challenges impacting oil demand.
  • OPEC announces an additional 2.2 mb/d cuts for 1Q24; markets respond negatively, viewing the agreement as insufficient.
  • Revised global oil demand lowered to 2.2 mb/d for this year, primarily due to China's economic challenges; 2024 forecast remains at 1.53 mb/d.
  • Anticipated 1.50 mb/d global production growth in 2023, driven by non-OPEC, with US LTO exceeding expectations; US crude production hits a record 13.24 mb/d in September.
  • 2024 projection: 1.34 mb/d growth with additional OPEC cuts, resulting in a small supply surplus.
  • COP28 agreement criticised for lacking a fossil fuel phase-out plan.
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Oil Market Snapshot – November 2023

  • The price risk premium has diminished with Brent dropping back to around $80/bbl as the Israel-Hamas conflict is limited within the Gaza strip for now. Higher than expected US oil production, inventory builds, and China’s economic slowdown have all added downward pressure on prices.
  • The market awaits the postponed OPEC+ meeting at the end of month, delayed by disagreements on African quotas for next year. Analysts anticipate an extension of the current cut agreement into next year, with the possibility of further cuts to support prices.
  • The IEA has revised its global demand forecast up by 100,000 b/d to grow by 2.37 mb/d this year similar to our growth forecast of 1.41 mb/d and edging closer to OPEC’s forecasted 2.45 mb/d growth. OECD is driving the growth with China contributing the most as a result of the expansion of petrochemical industry and the continued recovery of travel industry.
  • Demand growth for 2024 is expected to slow to 1.52 mb/d, reflecting China's economic slowdown.
  • Our forecast sees global production to grow 1.48 mb/d in 2023, all from non-OPEC countries.  US LTO outperforming expectations with produ...

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Oil Market Snapshot – October 2023

  • The Israel-Hamas conflict and heightened geopolitical tensions initially raised oil prices by over $5/bbl but later dropped below $90/bbl due to concerns about a slowing global economy outweighing the war risk premium.
  • The US lifting sanctions on Venezuela, releasing 200,000 b/d into the market, exerted downward pressure on prices.
  • The worsening Chinese property sector's debt crisis could impact the financial system and impact the already weak economy. IMF revised China’s GDP growth down for both 2023 and 2024.
  • Despite weaker economy, Chinese oil demand rebound strongly, growing 1.96 mb/d this year, almost 80% of world total growth of 2.48 mb/d driven by rebound in travelling and industry, and petrochemical expansion.
  • However, demand growth for 2024 is expected to slow to 1.48 mb/d as a result of slower Chinese and global economies.
  • US LTO production grew 790,000 b/d January to July y-o-y, outperforming estimates. The revised forecast sees global production to grow 1.48 mb/d in 2023, all from non-OPEC countries.
  • If Saudi Arabia adds more barrels from next year, the market may face a surplus in 202...

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Oil Market Snapshot – September 2023

  • Brent is rising above $90/bbl due to supply constraints, with Saudi Arabia and Russia extending their voluntary cuts of 1.3 mb/d until year-end, and global demand is on the rise.  Russian diesel ban contributes to global fuel and oil price surge. Brent currently trading at $93/bbl. Central banks’ unchanged rates have limited price impact.
  • The EIA projects Brent to average $93/bbl in Q423, and major investment banks like Barclays, Goldman Sachs, Citi, and UBS have raised their forecasts to above $90/bbl, with some even reaching $100/bbl.
  • Hawkish central banks, geopolitical risks, and trade tensions may increase oil price volatility.
  • Anticipated demand growth for this year is around 2.28 mb/d, with China contributing 1.65 mb/d and strong Indian demand.
  • Supply stress is exacerbated by outages in Libya, China, Kazakhstan, a decline in Angola, and reduced seasonal biofuel production.
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Oil Market Snapshot – June 2023

  • Price volatility has continued this year, since the beginning of June initially rising to $78/bbl from a low of $72/bbl following the US government debt ceiling agreement and OPEC+ meeting with Saudi Arabia committing to extra production cuts, but fell back to $76/bbl as concerns over weaker global economy and oil demand growth overshadowing production cuts from OPEC.
  • US commercial crude inventory saw a small draw of 452,000 bbls, but there was a build in product inventories, including a 2.7 million bbls gasoline stockpile, indicating a slow pickup in US demand.
  • Global liquid demand is projected to exceed 2019 levels, reaching 102 mb/d with a growth of 2 mb/d this year, driven primarily by non-OECD countries, particularly China.
  • Despite slow economic recovery, Chinese demand is expected to grow 7.4% y-o-y as it rises from a low base after a 320,000 b/d reduction in 2022. Recovery in travel is driving fuel demand growth.
  • Russia has shown some signs of cutting production in May, but their full commitment to the pledged 500,000 b/d cut is yet to be seen.
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Oil Market Snapshot – April 2023

  • Brent is trading at c. $84/bbl after a surprise “voluntary” quota cut by some OPEC+ members, $4/bbl higher than last week.
  • Prior to the cuts, EIA forecast average Brent of $82.95/bbl in 2023. Price volatility is likely to be fuelled by the cuts, which come shortly after Saudi Arabia said pre-existing quotas would last to YE23.
  • We see global oil demand growth of 1.81 million b/d in 2023 (+40,000 b/d on previous), with a slower recovery in China and higher prices being key risks to demand growth.
  • The quota cuts may support inflation, leading central banks to further rate rises, potentially slowing the global economy.
  • Global production growth is forecast to be 1.05 million b/d in 2023, all from non-OPEC+ countries.
  • We expect OPEC supply to decline by 440,000 b/d in 2023, including the voluntary cuts.
  • Rising costs risk upstream project delays, slowing long term supply growth and potentially setting up a supply crunch.
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Oil Market Snapshot – March 2023

  • Brent is trading c. $85/bbl, up $3/bbl m-o-m, with prices volatile above $80/bbl as the market tries to make sense of an array of supply and demand risks
  • We see global demand growth of 1.77 million b/d in 2023 (+240,000 b/d on previous), with the OECD subdued by inflation as US demand appears to wane slightly in the latest data
  • China’s reopening once again drives demand growth, but the size and speed still remains uncertain, as does OECD interest rate policy
  • We forecast global production growth of 1.44 million b/d in 2023 (+240,000 b/d on previous) with the US the main contributor
  • Brazil, Norway, Canada, Guyana and China all grow, but are balanced by Russia’s estimated 900,000 b/d loss to sanctions and price caps
  • The threshold for a Saudi response to a price spike appears high after comments by the energy minister, likely requiring intervention from all major consuming nations, i.e., China, the US, the EU
  • We provisionally see inventories drawing 150,000 b/d on average in 2023 (60,000 b/d larger than previous), but Russian and OPEC+ supply, OECD and Chinese demand are all uncertain
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Oil Market Snapshot – February 2023

  • Brent is trading c. $82/bbl, up $2/bbl m-o-m, with agencies raising their expectations of global GDP growth as inflation eases, the US remains robust, and China reopens
  • We see global demand growth of 1.53 million b/d in 2023 (+90,000 b/d on previous), driven by non-OECD growth, reflecting the improving economic outlook
  • Indian demand has remained strong, while we see China once again driving global demand as the year wears on
  • We forecast global production growth of 1.2 million b/d in 2023 (-430,000 b/d on previous forecast) with the majority coming from outside OPEC
  • OPEC adds just 270,000 b/d in 2023 if policies remain the same, down from 2.58 million b/d in 2022 when the 2020 cuts deal was unwound
  • The latest OPEC+ meeting left quotas unchanged, and the next will be in two months
  • Oil majors posted record profits in 2022, with shareholder returns top priority
  • We expect Russia’s crude sanctions losses to be limited to 900,000 b/d, with the price cap and sanctions broadly effective, though Russia will be able to claw back some lost revenue
  • We see inventories drawing 90,000 b/d ...

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Oil Market Snapshot – January 2023

  • The year begins with Brent dipping below $80/bbl, as recession fears continue and China’s abandonment of “zero COVID” has led to a wave of infections and hospitalisations
  • With the Russian invasion of Ukraine ongoing and global energy markets are still reacting, volatility remains likely in the year ahead, though perhaps less intense than in 2022
  • We see global demand growth of 2.19 million b/d in 2022 (unchanged on previous)
  • For 2023, we forecast demand growth of 1.44 million b/d (+50,000 b/d), lower than that in 2022 as high energy prices impacting economy and weakening demand
  • We peg 2022’s global production growth at 4.03 million b/d (-10,000 b/d on previous) based on revisions to OPEC+ output and maintenance losses in Canada, Kazakhstan and Norway
  • Global production growth falls to 1.63 million b/d in 2023 (+220,000 b/d on previous) with the majority coming from outside OPEC and Russian losses limited to 900,000 b/d
  • We see inventories building 110,000 b/d on average in 2022 (-10,000 on previous), and 300,000 b/d in 2023 (+160,000 b/d on previous)
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Oil Market Snapshot – December 2022

  • December begins with Brent trading c. $87/bbl, a full $11/bbl below the first week of November but off lows of $82/bbl after China appeared to signal some easing of COVID policies
  • Our global demand growth of 2.19 million b/d for 2022 (+70,000 b/d on previous), which would keep demand below 2019 levels for another year
  • The narrative remains one of a weakening economic outlook, notwithstanding indications that China’s zero COVID policy may well be relaxed over the coming months
  • The poor economic picture will be a factor when OPEC+ meets virtually on 4th December, with the most likely outcome no change to quotas
  • We estimate the previous meeting’s quotas will see OPEC’s November production will fall by c. 750,000 b/d
  • We forecast global supply growth of 4.04 million b/d in 2022 (-90,000 b/d on previous) based on revisions to OPEC+ output and maintenance losses in Canada, Kazakhstan and Norway
  • Growth falls to 1.41 million b/d in 2023 (+180,000 b/d on previous), revised higher as some projects expected in 2022 now fall into 2023’s data
  • With Saudi Arabia reaching its final capacity plate...

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