The International Energy Agency (IEA) and OPEC released their monthly Oil Market Report this week. Both cut their demand forecasts for 2022 and 2023. Both are largely in line with the latest forecast from the US Energy Information Administration (EIA). The revisions also support last week’s OPEC+ move to reduce quotas by two million bpd, or effectively cut one million bpd of crude supply from November 1st, 2022.
OPEC cut their demand growth forecast by 460,000 bpd in 2022 to 2.64 million bpd while expected growth in 2023 was reduced by 360,000 bpd to 2.70 million bpd. For their part, IEA trimmed their 2022 demand growth forecast by 60,000 bpd to 1.9 million bpd and for 2023 they decreased their estimate by 470,000 bpd to 1.7 million bpd.
As you can see in the table below, the EIA Short Term Energy Outlook (STEO) this month paints a similar demand picture. But also note that OPEC remains significantly more optimistic on demand side than either the EIA or IEA.
While EIA, IEA and OPEC all expect slowing demand growth, all three are also forecasting historically robust growth for next year. Over the twenty-year period 2000-2019, global oil demand grew an average 1.2 million bpd compared with the lowest estimate in the table for 2023, the DOE-EIA, at 1.48 million bpd.
This highlights how, even with the nagging economic uncertainty hanging over this market, oil demand persistently exceeds expectations. This comes against a backdrop of extremely low fuel inventory cover worldwide, a growing web of sanctions and refinery limitations in the US and Europe. All of which could magnify any forecast miss.
Alexander Saucer
Alexander is a physical operations analyst supporting physical crude oil operations for producers. He has a BA in economics from Furman University.