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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Oil Market Snapshot – November 2022

  • The first week of November ends with Brent trading c. $98/bbl, up c. $5/bbl on a month ago after an OPEC+ quota cut of 2 million b/d
  • Our global demand growth of 2.12 million b/d for 2022 (unchanged on previous), which would keep demand below 2019 levels for another year
  • Concerns about global economic growth for 2023 are growing as energy high prices, Russia’s war in Ukraine and China’s economic issues all continue
  • The practical effect of the new OPEC+ quotas is a 1 million b/d cut to production from August levels, primarily from OPEC countries close to quota: Saudi Arabia, UAE, Kuwait and Iraq
  • We forecast global supply growth of 4.13 million b/d in 2022 (-310,000 b/d on previous) factoring in this cut and reductions in Russian and Kazakh output
  • Global supply growth falls to 1.23 million b/d in 2023 on OPEC+’s current quotas, as Russian exports decline from January in response to European sanctions
  • We see inventories building 510,000 b/d on average in 2022 (-100,000 on previous), and 30,000 b/d in 2023 (-450,000 b/d on previous) on current policies
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Oil Market Snapshot – October 2022

  • September ends with Brent trading c. $85/bbl, down c. $9/bbl on a month ago but rising against mid-month prices, as Russia calls up conscripts for its invasion of Ukraine
  • We forecast global demand growth of 2.12 million b/d for 2022 (-40,000 b/d on previous), which would keep demand below 2019 levels for another year • There are significant concerns about global economic growth for 2023 as high energy prices continue to bite
  • We forecast global supply growth of 4.44 million b/d in 2022 (+930,000 b/d on previous)
  • Losses to Russian production will be smaller than anticipated and fall mostly in 2023, as the EU puts its price cap negotiations on hold, though December will be 1 million b/d below January 2022
  • OPEC+ meet on 5th October expecting to cut, after Russia has proposed a 1 million b/d quota reduction
  • Any actual production cuts would have to come from those members meeting or almost meeting their quotas, i.e. primarily Gulf states such as Saudi Arabia and its allies
  • We see inventories building 610,000 b/d on average in 2022, and 480,000 b/d in 2023 on current policies. Changes to OPEC+ policy wo...

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Oil Market Snapshot – September 2022

  • September begins with Brent trading c. $94/bbl, down c. $6/bbl on a month ago, as the high demand summer season ends and concerns over the global economy crystallise
  • We forecast global demand growth of 2.16 million b/d for 2022 (-50,000 b/d on previous), which would keep demand below 2019 levels for another year
  • European nations have drawn up plans for energy shortages this winter, while the Chinese city of Chengdu has entered a fresh lockdown
  • We forecast global supply growth of 3.53 million b/d in 2022 (-220,000 b/d on previous)
  • Russia has been able to export to both India and China over the summer, but it remains to be seen whether its production rate can be sustained during periods of weaker demand
  • OPEC+ meet on 5th September, with the most likely outcome little to no change in quotas, despite recent comments by Saudi energy minister, Prince Abdulaziz bin Salman, referring to a production cut
  • The Prince stated that negotiations over a fresh quota agreement have not yet begun, which suggests any cut would be tied to the return of Iranian barrels to the market, and would be a Gulf state matter
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Oil Market Snapshot – August 2022

  • Brent has started August below $100/bbl, with OPEC+ agreeing a tiny quota increase of 100,000 b/d, while US commercial inventories built, supported by SPR releases
  • We forecast global demand growth of 2.21 million b/d for 2022 (-120,000 b/d on previous), which would keep demand below 2019 levels for another year
  • Slowing global economic growth due to high inflation and high energy prices is hampering oil demand, with US and China seeing softer demand growth
  • We forecast global supply growth of 3.73 million b/d in 2022 (+250,000 b/d on previous), after the return of Libyan output to 1.2 million b/d and Russia’s current production recovery
  • Russian total oil production has reportedly recovered to 10.72 million b/d in July. While the EU has made transactions with Rosneft marginally easier, fuller sanctions will arrive YE22
  • OPEC+ are still cautious about increasing supplies, as any increase requires a delicate renegotiation of the deal and Saudi Arabia remains unwilling to tap limited spare capacity
  • Cuts on the OPEC side are now fully unwound, with production back to February 2020 levels
  • We se...

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Oil Market Snapshot – July 2022

  • July starts with Brent trading c. $111/bbl, down $6/bbl against the start of June, after yet another volatile month as tight supply and recession concerns do battle
  • We forecast global demand growth of 2.33 million b/d for 2022 (-50,000 b/d on previous), which would keep demand below 2019 levels for another year
  • China's lockdowns continue to hamper demand, but the country is stocking up on discounted Russian crude, while US demand growth slows as inflation hits a 40 year high
  • We forecast global supply growth of 3.5 million b/d in 2022 (+500,000 b/d on previous), recalibrating Russian production upward due to weakening efficacy of Western sanctions
  • Russian production has reportedly recovered to c. 9.8 million b/d, though it remains to be seen how temporary this is
  • Major outages in Libya and Ecuador take 850,000 b/d off the market, while Saudi increases fail to keep pace with quotas
  • OPEC+ will end its current quotas a month early, and will now have to negotiate its next phase as soon as 3rd August
  • It will be a tricky negotiation for Saudi Arabia, as the Kingdom attempts to steer between its...

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