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.
With outages in Iraq and Nigeria, along with the OPEC production cut agreement, we anticipate OPEC’s production to decline by 510,000 b/d and global liquid growth to be 1.05 mb/d, resulting in a significant 800,000 b/d deficit overall in 2023.
Uncertainty surrounding the recovery in China and the global economy, OPEC and Russian production cuts are the main risk factors affecting the market.
