OIL

SAUDI’S CRUDE OIL OUTPUT CUT BRINGS RESPITE TO GLOBAL MARKETS

Saudi Arabia’s decision to extend its voluntary oil production cut of 1 million barrels per day (bpd) until the end of this year is deemed supportive of the oil market. The output reduction has been in place since July.

Quoting an energy ministry source, the Saudi Press Agency (SPA) reported that the decreased production is “in addition to the voluntary cut previously announced by the kingdom in April 2023, which extends until the end of December 2024. The source confirmed that this additional voluntary cut comes to reinforce the precautionary eorts made by OPEC+ countries, with the aim of supporting the stability and balance of oil market.

The kingdom’s production for the months of October, November, and December is expected to be approximately 9 million bpd, according to the SPA report.

Russia supported Saudi Arabia’s move with its own decision to extend an additional voluntary reduction in oil supplies to world markets by 300,000 bpd until the end of December 2023.

Saudi’s decision will be reviewed monthly to consider the possibility of deepening the reduction or increasing production, depending on market conditions.

   

GLOBA MARKETS

The Saudi and Russian decisions come as global oil demand growth projections for 2023 remain steady at 2.4 million bpd, as per OPEC’s latest assessment.

Supporting demand, ICE Brent crude oil front-month price averaged USD 4.94, or 6.2%, higher in August to stand at USD 85.10 per barrel, and NYMEX WTI rose by USD 5.29, or 7.0%, to average USD 81.32 per barrel.

The upbeat adjustment are based on verifiable data from China, the United States, and OECD Europe, while expectations for Other Asia have been tempered downward. In the OECD region, a modest increase of 0.1 million bpd in oil demand is anticipated for 2023, while non-OECD areas are poised for a more substantial growth of approximately 2.3 million bpd.

“However, the rally of oil prices was somewhat dampened by broader financial market trends, particularly major US equities,” OPEC noted. “Lower financial market performance acted as a counterbalance to the positive momentum in the oil market. The value of the US dollar rebounded during this period, acting as a headwind to the rise in oil prices.”

 

DEMAND SHOWS NO LET-UP

Looking ahead to 2024, the outlook for worldwide oil demand continues to show resilience, with a consistent projection of 2.2 million bpd, matching the preceding month's evaluation.

Within the OECD, a growth of around 0.3 million bpd is foreseen, with the OECD Americas region contributing notably to this expansion. In contrast, non-OECD regions are expected to spearhead the global growth, with an approximate increase of 2.0 million bpd, fuelled primarily by robust contributions from China, India, the Middle East, and Other Asia.

Meanwhile, OPEC revised upwards its non-OPEC liquids supply growth forecast to 1.6 million bpd in 2023.

“Main drivers of liquids supply growth for 2023 include the US, Brazil, Norway, Kazakhstan, Guyana and China,” OPEC noted in its September report. “For 2024, non-OPEC liquids production is expected to grow by 1.4 million bpd, unchanged from the previous month’s assessment.

Main drivers for liquids supply growth next year are set to be the US, Canada, Guyana, Brazil, Norway, and Kazakhstan. The largest declines are anticipated in Mexico and Malaysia.

OPEC natural gas liquids (NGLs) and non-conventional liquids are forecast to grow by around 50,000 bpd in 2023 to average 5.44 million bpd and by another 65,000 bpd to average 5.51 million bpd in 2024. OPEC-13 crude oil production in August increased by 113,000 bpd, month on month, to an average 27.45 million bpd, OPEC stated.

“The ongoing global economic growth is forecast to drive oil demand, especially given the recovery in tourism, air travel and steady driving mobility,” OPEC noted. The year-on-year oil demand is expected to grow by 2.4 million bpd in 2023 and 2.2 million bpd in 2024.

The organisation has also predicted that pre-COVID-19 levels of total global oil demand will be surpassed in 2023 to average at 102.1 million bpd, and rise further to 104.3 million bpd in 2024.