Comparative Analysis of Monthly Reports on the Oil Market

Oil Market Context

Fragile economic outlook persists

The OECD's updated global economic outlook, released on June 6th, noted that the global economy "has begun to improve, but the recovery will be weak." The global GDP growth projections for 2023 and 2024 were unchanged from March's forecast at 2.7% and 2.9%, respectively. The report noted that the balance of risks remains skewed to the downside as inflation could prove more persistent than expected. OPEC's 2023 oil demand forecast assumes global GDP growth of 2.6%. IEA did not include its GDP assumption in this month's report.

Production cuts plus

OPEC+ met on June 4th and agreed to extend current crude production cuts through 2024. The cuts had been scheduled to expire at the end of 2023. In addition, Saudi Arabia announced an extra voluntary cut of 1 mb/d for the month of July 2023 that may be extended. OPEC+ stated that these efforts are to provide long-term guidance for the market while being "precautious, proactive, and pre-emptive." The group also agreed to adjust some members' baseline levels to better reflect their current maximum production capacity. The new baselines go into effect in 2024. The next OPEC+ Ministerial meeting is scheduled for November 26, 2023. 

US rig count falters

The US oil and gas rig count has fallen for 6 consecutive weeks for the first time since July 2020. The latest figure, for June 9, 2023, shows oil and gas rigs stand at 695 – the lowest level since April 2022 and more than 11% below the post-COVID peak seen in early December 2022. The US rig count is closely watched as an early indicator of US production. However, the IEA, OPEC, and EIA forecasts see US production growing by ~1 mb/d this year, accounting for more than half of all non-OPEC supply growth.

Russian exports take to the sea

Tanker tracking data shows Russian seaborne crude exports rose to a post-war high of 3.9 mb/d in May, while oil product exports fell 13% month-on-month due primarily to seasonal refinery maintenance. The increase in seaborne crude exports is due in part to reduced pipeline exports to Europe and lower domestic refinery runs. Nearly 90% of the seaborne crude exports are now headed to Asia and Turkey, up from pre-war levels of ~35%. India imported 2 mb/d of Russian crude in May, a record high.

2023 Forecast Highlights:

• Global demand:

  • IEA and OPEC remain fairly aligned on global demand growth (~2.3-2.4 mb/d), while EIA sees lower growth (1.6 mb/d).
  • This month, IEA revised up its 2023 demand growth forecast by 0.2 mb/d primarily on higher Chinese demand.
  • IEA sees ~0.7 mb/d higher Chinese demand growth this year vs. EIA and OPEC with 1.5 mb/d vs. 0.8 mb/d, respectively. 
  • OPEC and IEA see global demand averaging above 103 mb/d by 4Q23, whereas EIA's quarterly forecast remains below 102 mb/d.

• Non-OPEC and OPEC NGL supply:

  • EIA sees the strongest non-OPEC and OPEC NGL supply growth this year at 2.1 mb/d. IEA and OPEC are more closely aligned at 1.7 mb/d and 1.5 mb/d, respectively.
  • The largest divergence in supply forecasts is in Russian production. OPEC sees a 0.7 mb/d decline in Russian output this year vs. IEA's and EIA's forecast of a 0.2-0.3 mb/d decline.
  • All three forecasters expect the US to be the largest driver of non-OPEC supply growth, adding ~1 mb/d of new supply this year.

• "Call on OPEC":

  • IEA and OPEC see the "call on OPEC" rising to 30.2-30.6 mb/d in the second half of the year. This implies a >2 mb/d global supply shortfall in 2H23 if OPEC production were to remain constant at May levels (28.07 mb/d).
  • EIA's 2023 "call on OPEC" is 2.0 mb/d lower than IEA's due to EIA's lower demand and higher supply forecasts.

• May OPEC production:

  • OPEC secondary sources show OPEC production declined by 0.46 mb/d in May to 28.1 mb/d led by a 0.5 mb/d cut from Saudi Arabia. IEA estimates show OPEC crude production falling by 0.38 mb/d in May to 28.5 mb/d led by a 0.5 mb/d decline from Saudi Arabia. IEA estimates a higher production figure for Iran and UAE vs. OPEC secondary sources.

• OECD inventories:

  • IEA estimates OECD commercial inventories rose by 33.6 mb in April to 2,795 mb and stood 86.4 mb below the five-year average. OPEC estimates OECD commercial stocks rose by 30.2 mb in April to 2,808 mb and stood 74 mb below the latest five-year average and 119 mb below the 2015-2019 average.

2024 Forecast Highlights:

IEA issued its inaugural 2024 forecast this month. OPEC is scheduled to issue its first 2024 outlook in July.

• Global demand:

  • IEA sees global demand growth slowing to 0.9 mb/d in 2024 from 2.4 mb/d y/y in 2023.
  • EIA's 2024 global demand growth forecast is unchanged this month at 1.7 mb/d.
  • IEA sees OECD demand declining by 0.4 mb/d next year, with US demand dropping by 0.23 mb/d. Meanwhile, EIA sees OECD growing by 0.25 mb/d, with US increasing by 0.26 mb/d.
  • Despite having a lower y/y growth forecast compared to EIA, IEA sees higher demand levels than EIA for most of 2024 due to a higher 2023 baseline forecast. IEA sees quarterly demand rising to 104.4 mb/d by 4Q24 vs. EIA's 103.1 mb/d.

• Non-OPEC and OPEC NGL supply:

  • Both IEA and EIA see non-OPEC and OPEC NGL supply growing by 1.0-1.1 mb/d in 2024. This is a sharp slowdown from IEA and EIA's 2023 estimates of 1.7 mb/d and 2.1 mb/d, respectively.
  • Notably, IEA and EIA both see US production growth slowing to 0.4 mb/d next year from ~1.0 mb/d this year. Despite a significant slowdown, the US is still the strongest driver of non-OPEC supply growth in 2024. Canada, Brazil, and Norway are also expected to contribute growth next year.
  • IEA sees a slightly steeper drop in Russian production at -0.2 mb/d vs EIA's -0.1 mb/d.

• "Call on OPEC":

  • IEA's balance implies OPEC would need to produce an average 29.4 mb/d in 2024 to balance the market. This is 1.3 mb/d higher than the group produced in May 2023.
  • EIA's balance implies OPEC would need to produce an average of 28.4 mb/d in 2024 to balance the market. This is 0.3 mb/d higher than the group produced in May 2023.
  • EIA's 2024 "Call on OPEC" is 1.0 mb/d lower than IEA's largely due to wide divergences in the 2023 baseline forecasts.

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