Prices are set to continue rising
In June, global oil demand hit a record 103 million barrels per day (mbd) and is expected to reach another peak in August.
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According to the latest monthly oil market report for August 2023 from the International Energy Agency (IEA), Global oil demand has broken a record and prices aim to continue rising.
In June, global oil demand hit a record 103 million barrels per day (mbd) and is expected to hit another peak in August. After two quarters of contraction, overall demand returned to growth in the second quarter of 2023. In addition, demand for OECD was revised upwards for May and June. Despite concerns about the health of the Chinese economy, its demand was also stronger than expected and reached new highs.
“The increase in air travel during the summer, the use of oil for power generation, and the activity of China’s petrochemical industry are driving increased demand,” the report states. Global oil demand is estimated to reach 102,2 million barrels per day (mbd) by the end of the year, an unprecedented figure for a full year. China will account for more than 70% of this increase in demand, despite concerns about its economy.
For the current year, global oil demand is expected to expand by 2,2 mbd, reaching a record annual level of 102,2 mbd. However, as The energy transition accelerates and the post-pandemic recovery runs out, growth is expected to slow to 1 mbd in 2024.
In July, global oil supply fell by 910 kbd to 100,9 mbd. Block production OPEC + fell 1,2 mbd to 50,7 mbd due to a sharp reduction in production from Saudi Arabia, while non-OPEC+ volumes increased by 310 kbd to 50,2 mbd. Global oil production is projected to expand by 1,5 mbd, reaching a record 101,5 mbd in 2023, with EUnited States the main driver of non-OPEC+ gains, with an increase of 1,9 mbd. For next year, non-OPEC+ supply growth is expected to dominate, increasing by 1,3 mbd, while OPEC+ could only add 160 kbd.
Refineries are struggling to keep up with demand growth due to the shift to new commodities, breakdowns and high temperatures, which has forced many operators to work at reduced rates. Gasoline and diesel markets are tight, leading to six-month high margins. Although gasoline remains under pressure due to competition from cheap LPG and weak petrochemical activity outside China, high-sulfur fuel oil has tightened significantly as refiners have replaced lost OPEC+ crude with lighter, sweeter grades. In Rotterdam, high sulfur fuel oil surpassed Dated North Sea for the first time in 28 years.
As a result, stocks of crude oil and products have been significantly reduced. In July, observed oil stocks declined for the third consecutive month, and OECD industry stocks are more than 100 mbd below the five-year average. Market balances are tightening further in the autumn as Saudi Arabia and Russia They extend supply cuts until September. Although OPEC+ has a spare capacity reserve of 5,7 mbd, allowing significant room to increase production later in the year, if the bloc's current targets are maintained, oil stocks could fall by 2,2 mbd in the third quarter of 2023 and 1,2 mbd in the fourth quarter, which would increase the risk of higher prices.
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