Global oil demand is expected to slow down from 3.36 million bpd of growth this year to a growth of 2.7 million bpd in 2023, OPEC said on Tuesday in its first demand estimates for next year. These demand estimates appear particularly optimistic on Tuesday morning as concerns about an economic slowdown and renewed Covid lockdowns in China sent oil prices crashing by more than 7%.
Solid economic growth in major consuming countries, improved geopolitical developments, and containment of COVID outbreaks in China are set to support global oil demand in 2023, the cartel said in its closely-watched Monthly Oil Market Report (MOMR) published today.
Although the annual pace of growth is expected to slow to 2.7 million bpd next year from 3.36 million bpd this year, total world demand in 2023 is expected to average a record high at 103 million bpd, up from 100.29 million bpd expected for 2022. Currently, OPEC sees global oil demand in the fourth quarter of 2023 at as high as 105.4 million bpd.
OPEC assumes that the global economy will grow in 2023 and that COVID, the war in Ukraine, or monetary policy tightening will not impact economic growth “to a major degree.” OPEC’s estimates of global oil demand also assume that major economies revert back towards growth.
“Nevertheless, uncertainty to the forecast remain to the downside, with much depending on the course of the pandemic and related measures, global financial tightening in the light of growing inflation, and the resolution of the ongoing geo-political issues in Eastern Europe,” OPEC said.
Last month, in its first outlook for 2023, the International Energy Agency (IEA) said that oil demand growth was set to accelerate next year, with global demand averaging a record 101.6 million bpd and exceeding pre-COVID levels.
“While higher prices and a weaker economic outlook are moderating consumption increases, a resurgent China will drive gains next year, with growth accelerating from 1.8 mb/d in 2022 to 2.2 mb/d in 2023,” the IEA said in its Oil Market Report for June.
In terms of supply, OPEC said today it expects U.S. liquids production growth of 1.1 million bpd in 2023, mainly from crude in the Permian and non-conventional natural gas liquids (NGLs).
By Tsvetana Paraskova for Oilprice.com
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The main driver of global oil demand in 2023 will be as usual China. Moreover, the Ukraine conflict is coming to its end with Russia dominating the Donbas and Ukraine’s coast and ports. Soon Ukraine will be encouraged by its Western supporters to sue for peace with Russia.
And whilst recession in normal circumstances results in a shrinking of the global economy and demand destruction. This year it could do neither because of the tightness of the global oil market, shortages and a fast-shrinking global oil spare capacity including OPEC+’s. That is why OPEC+’s projection could prove spot on.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London