Key takeaways
1. Analysts’ forecasts were correct: after the market surplus in 1H 2023, a deficit of 270 thousand bbl/d formed in Q3 2023, which is expected to continue until Q1 2024.
The imbalance in the oil market is caused by restricted supply from OPEC+ and continued steady demand from developing APAC countries, in particular China.
Against the general slowdown in economic growth, mainly the countries of East and Central Asia will increase GDP growth rates, which, in turn, will create additional pressure on the global energy balance.
2. Oil demand remains strong in China and India. Although analysts’ estimates of the actual volume of demand from these countries vary, they agree that the largest increase in demand in 2024 will come from China and the Middle East.
According to the results of Q3 2023, a significant factor in the increase in global oil demand was the higher demand of European countries caused by consistent demand for gasoline and jet fuel in the services sector and private consumption.
3. The key factor in the market imbalance was the supply cuts of OPEC+countries. In early September 2023, Saudi Arabia announced the extension of a voluntary cut in oil production by 1 mln bbl/d until the end of 2023. Russia supported a similar measure announcing an extension of the voluntary cut of oil exports to global markets by 300 thousand bbl/d until the end of 2023.
The key factor in the market imbalance was the supply cuts of OPEC+countries. In early September 2023, Saudi Arabia announced the extension of a voluntary cut in oil production by 1 mln bbl/d until the end of 2023. Russia supported a similar measure announcing an extension of the voluntary cut of oil exports to global markets by 300 thousand bbl/d until the end of 2023.
Lower supply from the alliance is expected to be partially offset by higher output from non-OPEC+ countries. The United States, Iran and Brazil will be the main drivers of supply growth.
4. In Q3, the price trend on the oil market changed: from mid-August, the price of Brent crude oil rose steadily. In September 2023, the quotations consistently exceeded USD 90/bbl.
Analysts’ short-term forecasts are being pushed up by the deficit situation. For example, by the end of 2023 oil prices are forecast at USD 80-90/bbl. Subsequent forecasts by analysts vary, with some predicting a rise in prices in 2024 compared with 2023 levels, while others expect a fall.
From 2025 onwards, there is a trend towards lower forecast prices, reflecting the expected balance of supply and demand in the market.
The current long-term (after 2027) consensus forecast for the price of Brent oil was revised downward to around USD 68/bbl, in real terms, in 2023 prices.
