- 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.
by Graham Walker // 4 April, 2023
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