Thursday 16 / May / 2024
Muscat: World oil demand growth estimate for 2023 was kept unchanged at 2.4 million barrels per day (mb/d) with aggregate demand expected to reach 102.06 million barrels per day, according to a new report. However, downward adjustments were made to demand data mainly for the Organisation for Economic Co-operation and Development (OECD) region (OECD Americas, Other Asia and Africa) for the first three quarters of the year that was offset by upward revision to Q2-2023 and Q3-2023 demand data for the non-OECD region, especially China.
Demand growth estimates for 2024 were also kept unchanged at 2.2 mb/d and total demand is expected to reach 104.31 mb/d led by expected healthy growth in the global economy coupled with continued improvements in China, Kamco Invest said in its latest report. Near term expectations for the US showed healthy economic growth as the labour market remains tight resulting in strong support for private household consumption with sustained robust disposable income levels.
Air travel activity is expected to remain healthy in Q4-2023 driving demand for jet fuel, while gasoline demand is expected to be hit by a drop in driving activity owing to the winter season. Weak manufacturing activity is also expected to impact demand for industrial fuels, including diesel. Meanwhile, the services sector in the US, which had remained resilient this year, witnessed a slowdown in September-2023 with new orders falling to a 9-month low. Nevertheless, the sector showed growth with the associated non-manufacturing PMI at 53.6 during September-2023.
Meanwhile, oil demand in China remained upbeat with the country releasing its fourth batch of import quotas. The total volume for 2023 is expected to reach 203.64 million metric tonnes, indicating an increase of 14 percent from last year’s 179 million tonnes, according to Reuters. A separate report from Reuters showed that China raked in savings of nearly $10 billion through record purchases of oil from Russia, Iran and Venezuela that are placed on sanctions by the US. The lower-priced crude oil imports also boosted refinery throughput and margins, especially for small independent operators known as "teapots". On the other hand, oil imports in India declined for the second consecutive month during September-2023 to reach 4.19 mb/d as compared to 4.34 mb/d during August-2023 mainly due to the autumn refinery maintenance season and lower demand in monsoons.
World oil supply
Global liquids production once again remained unchanged in September-2023 as compared to August-2023. According to preliminary data, global oil supply averaged at 100.6 mb/d. According to Opec, the month saw a decline in supplies from non-Opec suppliers by 0.3 mb/d that averaged at 72.9 mb/d as higher production in Other Euroasia and the UK was offset by drop in production in Russia and the US. This decline was offset by an increase in Opec production during the month.
Non-Opec oil supply growth estimates for 2023 witnessed an upward revision of 0.1 mb/d in the latest Opec monthly report to a growth of 1.7 mb/d with aggregate supply now expected to reach 67.49 mb/d. The upward revision mainly reflected higher supplies from Russia (+80 thousand barrels per day (tb/d), the US (+49 tb/d) and Brazil (+45 tb/d) partially offset by downward revision to supply forecast for Norway and UK (-25 tb/d each), Azerbaijan and Kazakhstan. Forecast for 2024 was kept unchanged at a growth of 1.38 mb/d with non-Opec supplies reaching 68.88 mb/d.
The latest STEO from the US EIA showed production in the country reaching a record high of 13.13 mb/d in Q3-2023 while forecast for Q4-2023 showed even higher production of 13.16 mb/d. However, oil rig count data did not corroborate with higher output data as rigs have shown consistent declines over the last few months reaching the lowest since February-2022 during the week ending 6-October-2023 at 497 rigs. The latest weekly report showed growth of 4 rigs after three straight weeks of declines. Oil executives in the US indicated that $90 per barrel is the new trigger point for adding oil rigs in the US.
Opec production & spare capacity
Oil production by the Opec witnessed growth for the second consecutive month during September-2023. Aggregate production reached 27.97 mb/d during the month registering a growth of 50 tb/d, as per Bloomberg data, mainly led by higher production in Nigeria, Iraq and the UAE that was partially offset by lower production in Iran, Libya and Equatorial Guinea.
Production data from Opec secondary sources showed a much sharper monthly growth of 273 tb/d with aggregate production reaching 27.76 mb/d during the month. The growth, as per Opec, was led by a steep increase in production in Nigeria (+141 tb/d) and Saudi Arabia (+82 tb/d) that was partially offset by decline in production in Venezuela, Equatorial Guinea and Angola. Production changes in the rest of the Opec members were mostly marginal but positive as per Opec monthly report.
During the month, Saudi Arabia and other Opec+ members affirmed to stick to the existing production policies of the group, in addition to voluntary cuts mainly implemented by the Kingdom and Russia. Saudi Arabia produced at 9 mb/d during September-2023 after adding 20 tb/d vs. last month, as per Bloomberg, while Opec secondary sources showed an increase of 82 tb/d.
Reports also showed that the cut in output by Saudi Arabia has affected diesel supplies in particular because of the heavier crudes produced by the Kingdom and this could affect flows and push up prices of the refined product during the upcoming winters. Iran also produces heavy crudes but the conflict in Palestine may also affect supplies from Iran.
Oil production in Iran also increased during the month to reach 3.1 mb/d, the highest since October-2018 as negotiations on possible easing of US sanctions on the country continued. Reports have also showed higher exports from Iran over the last few months.
Oil production in Nigeria reached the highest level in 2023 at 1.4 mb/d during September-2023 mainly led by full resumption of the country’s Forcados crude grade while it continued to make efforts to minimise oil theft and vandalism, according to S&P Platts. Oil production in Libya declined by 30 tb/d during the month as per Bloomberg to reach 1.11 mb/d. The decline came as a result of shutdown of several terminals due to Storm Daniels.
