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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