On Monday, the Organization of the Petroleum Exporting Countries (OPEC) asserted that market fundamentals remained robust despite what it deemed as “exaggerated negative sentiments,leadership reports.
In its latest report, OPEC adjusted its projection for global oil demand growth in 2023 to 2.46 million barrels per day (bpd), an increase of 20,000 bpd from the previous estimate. The forecast for 2024 maintained a demand rise of 2.25 million bpd, consistent with the prior month’s outlook.
In its monthly report, OPEC emphasized strong global growth trends and a healthy oil market, backed by solid Chinese imports, minimal downside risks to economic growth, and a resilient physical oil market.
The report acknowledged the recent decline in oil prices, attributing it primarily to financial market speculators. Brent crude, which reached a 2023 high of nearly $98 a barrel in September, has retreated to around $82. Despite OPEC and its allies implementing supply cuts and geopolitical tensions in the Middle East, concerns about economic growth and demand have weighed on prices.
Oil demand in 2023 has seen an uptick, aided by the easing of pandemic restrictions in China. OPEC’s demand growth projections for the coming year consistently exceed those of other forecasters like the International Energy Agency.
This report precedes the OPEC+ meeting on Nov. 26, where the group will convene to set policy. Since late 2022, OPEC+ has been curtailing production to bolster the market, and their current agreement calls for ongoing output restrictions throughout 2024.
The report also noted a rise in OPEC oil production in October, attributed to increased output in Nigeria, Iran, and Angola, despite pledged supply cuts. Iran, exempt from OPEC cuts due to U.S. sanctions, has been increasing production, possibly due to successful evasion of sanctions and a lenient U.S. enforcement stance. Nigeria and Angola are rebounding from internal challenges that previously constrained their output.
While the feature article in the report highlighted the underlying strength of the oil market, it also acknowledged that Nigeria’s oil output, along with that of the 11 members subject to output limits, remained below their target levels. Additionally, OPEC pointed to robust physical crude markets, citing strong crude differentials globally in October and early November.
The report provided data showing a decline of 15.6 million barrels in total commercial oil inventories in the Organisation for Economic Co-operation and Development (OECD) countries in September, reaching 2.78 billion barrels. This represents a significant deviation from the latest five-year average of approximately 118 million barrels and is 184 million barrels less than the 2015-2019 average.
Preliminary data indicated a month-on-month reduction of 9.1 million barrels in U.S. commercial oil inventories in September, totaling 1.26 billion barrels. Although this is approximately 32 million barrels higher than the September 2022 reading, it is 20.6 million barrels less than the average of the previous five years.