Comparative Analysis of Monthly Reports on the Oil Market

Oil Market Context

Energy markets contend with vying geopolitical and macro-economic risks

The unfolding crisis in Israel and Gaza has again sparked an escalation in geopolitical risk in the Middle East. While there has been no direct impact on physical oil supplies, market participants are closely monitoring the crisis and have priced in a ~$3/bbl risk premium for oil at the time of writing.

Immediately before Hamas' surprise attack on October 7th, Brent oil prices had tumbled $14/bbl from their peak in mid-September on reignited global economic and demand concerns. US preliminary weekly data for the end of September showed a sharp drop in gasoline demand (to >20-year seasonal lows) and a rise in gasoline inventories. However, weekly data can be volatile and is frequently revised in final data.

The IEA warned that elevated energy prices have caused demand destruction in Nigeria, Pakistan, and Egypt, particularly for gasoline. However, it also noted that these challenges are not yet widespread and other demand centers, such as China, India, and Brazil, are continuing to see robust demand growth. Latest data indicates Chinese demand rose to another record high in August, rising 2.7 mb/d year-on-year.

IMF warns of persistent inflation and revises global growth forecasts lower

The IMF published its updated World Economic Outlook on October 10th and revised up its 2024 inflation forecast to 5.8% from 5.2% projected just three months ago. The IMF also warned that the global economy is "limping," lowering its global growth outlook for next year to 2.9% (from 3.0% forecasted in July) which is well below the annual average of 3.8% seen in 2000-2019.

Saudi Arabia and Russia extend voluntary production cuts through December

On October 4th, Saudi Arabia reaffirmed its extension of its voluntary 1 mb/d production cut through December. The press release noted that the decision would continue to be reviewed monthly, and the cuts could be deepened or reversed. Russia also previously announced it would extend its voluntary 300 kb/d cut through end-year. OPEC+ is scheduled to meet on Sunday, November 26th in Vienna. It will be the first full Ministerial Meeting for the group since June 4th.

2023 Forecast Highlights:

• Global demand:

  • Global demand growth forecasts were largely unchanged this month. IEA and OPEC remain aligned on global demand growth (~2.3-2.4 mb/d) while EIA sees lower growth (1.8 mb/d).
  • IEA continues to see ~1.0 mb/d higher Chinese demand growth vs. EIA and 0.6 mb/d higher vs. OPEC. Meanwhile, OPEC sees more robust demand in Russia, Africa, the Middle East and other non-OECD countries compared to IEA and EIA.
  • OPEC's update incorporated offsetting baseline demand revisions that impacted historic and forecasted demand levels but not demand growth. The revisions included a ~0.3 mb/d downward adjustment to historical and forecast US demand and a ~0.3 mb/d upward revision to historical and forecast non-OECD demand (largely China and Russia).

• Non-OPEC and OPEC NGL supply:

  • OPEC revised up non-OPEC supply in 2Q23 by 0.2 mb/d and 3Q23 by 0.4 mb/d on higher production in Canada and Russia.
  • IEA and EIA both now see non-OPEC supply growth at 2.2-2.3 mb/d while OPEC continues to see lower growth at 1.7 mb/d.
  • The largest divergence in supply forecasts is for Russian production where OPEC sees 4Q23 supply levels at 1.0-1.3 mb/d below IEA and EIA forecasts.
  • All three outlooks expect the US to be the largest driver of non-OPEC supply growth, adding around 1.2-1.5 mb/d of supply this year.

• "Call on OPEC":

  • OPEC and IEA balances imply a 1.5-3.0 mb/d global supply deficit in 4Q23 if OPEC production stays at September levels.

• September OPEC production:

  • OPEC secondary sources show OPEC production rose by 0.27 mb/d in September to 27.75 mb/d led by a 141 kb/d increase from Nigeria. IEA estimates show OPEC crude production rose by 0.24 mb/d to 28.21 mb/d. IEA estimates a higher production figure for UAE and Iran vs. OPEC secondary sources.

• OECD inventories:

  • IEA estimates OECD commercial inventories fell counter-seasonally in August by 6.5 mb to 2,816 mb and stood 105.3 mb below the five-year average. OPEC estimates OECD commercial stocks fell by 11.0 mb in August to 2,803 mb and stood 117 mb below the latest five-year average and 182 mb below the 2015-2019 average.

2024 Forecast Highlights:

• Global demand:

  • IEA and EIA both revised down their 2024 demand growth forecasts slightly to 0.9 mb/d and 1.3 mb/d, respectively. OPEC continues to see much more robust demand growth at 2.2 mb/d.
  • IEA sees OECD demand declining by 0.4 mb/d next year while OPEC expects 0.3 mb/d growth. Additionally, OPEC sees 0.2 mb/d stronger demand growth in the Middle East next year compared to both IEA and EIA.
  • Notably, OPEC shows quarterly demand climbing in 1Q24 to ~2 mb/d above IEA and EIA forecasts.
  • Despite having a lower y/y demand growth forecast, IEA sees higher demand levels than EIA for most of 2024 due to a higher 2023 baseline forecast. IEA sees quarterly demand rising to 103.9 mb/d by 4Q24 vs. EIA's 102.7 mb/d.

• Non-OPEC and OPEC NGL supply:

  • EIA revised down 2024 non-OPEC supply growth by 0.2 mb/d to 1.1 mb/d on a lower Canada and US forecast.
  • IEA and OPEC's forecast was unchanged at 1.3-1.4 mb/d.
  • All three forecasts both see US production growth slowing to 0.4-0.6 mb/d next year from >1.2 mb/d this year. Despite a significant slowdown, the US is still the strongest driver of non-OPEC supply growth in 2024.
  • Other drivers of non-OPEC supply growth include Brazil, Guyana, and Canada.

• "Call on OPEC":

  • The "call on OPEC" for next year ranges from 27.8 mb/d (EIA) to 29.9 mb/d (OPEC). IEA falls in the middle at 28.3 mb/d. All three implied figures are at or above September's actual OPEC production of 27.8 mb/d, implying 0.0-2.1 mb/d of global inventory draws if OPEC production remained constant. Notably, Saudi Arabia's voluntary cut of 1 mb/d is currently expected to expire at the end of 2023 along with the >1 mb/d of voluntary cuts that were announced by several OPEC+ members on April 2nd.
  • OPEC's 2024 balance is ~1.6 mb/d tighter than IEA's and 2.1 mb/d tighter than EIA's primarily due to OPEC's higher demand forecast and tighter baseline (2023) balance.

Key Charts