OPEC continues to forecast demand for its oil growing significantly up to the end of 2023, albeit at a slightly lesser rate than it previously expected, in a sign it expects a significant tightening of the market in coming months.
In its monthly oil market report, OPEC said demand for its crude will grow 300,000 b/d in the second quarter, 1.3 million b/d in the third quarter and 2 million b/d for the fourth quarter compared to the same periods of 2022.
But for the full year 2023, the call on OPEC crude was estimated at 29.3 million b/d, down by 100,000 b/d compared to its previous report, with non-OPEC supply expected higher. It also revised down its estimates of demand for OPEC crude in 2024 by 100,000 b/d from the previous month's assessment to stand at 30.1 million b/d.
That was significantly above July production volumes, which were 27.31 million b/d, according to an average of secondary source estimates. Production was down 836,000 b/d month on month, as Saudi Arabia implemented a voluntary 1 million b/d cut.
Saudi Arabia self-reported a 943,000 b/d decline in production on the month. Nigeria also reported a significant drop of 168,000 b/d in output following issues with key export grade Forcados. OPEC and its allies plan to maintain aggressive supply restraint into the autumn in a bid to support prices. Saudi Arabia has said its extra unilateral cut of 1 million b/d will run through the end of September, while non-OPEC ally Russia has committed to a 500,000 b/d drop in crude exports for August and 300,000 b/d for September.
Uncertainty remains over compliance with the latest pledges, as well as its policy beyond September, however.
OPEC expects non-OPEC liquids supply to expand by 1.5 million b/d in 2023, a slight upward revision from its previous report, with the US, Brazil, Norway, Kazakhstan, Guyana and China expected to drive supply growth. In 2024 it expects non-OPEC liquids output to grow by 1.4 million b/d.
The production cuts should shrink global oil stocks significantly and reverse the last few months of builds. Commercial inventories held by OECD countries were up 4.2 million barrels in June to stand at 2.828 billion barrels, according to the OPEC report.
OPEC retained its estimates for world oil demand in 2023 and 2024, as upward revisions to first quarter data for OECD America and Europe were completely offset by downward revisions to 2Q23, mainly in Europe and Other Asia.
World oil demand in 2023 is expected to grow by 2.4 million b/d, unchanged from the last month's assessment.
OPEC said China was expected to see lower-than-expected oil demand growth in the second half of 2023, with recent economic indicators for the economy showing a slowing trend in industrial production. It expected Chinese oil demand to grow 710,000 b/d in the third quarter, and 590,000 b/d in the fourth quarter, both compared to 2022 levels.
OPEC revised up world economic growth for both 2023 and 2024 to stand at 2.7% and 2.6%, respectively.