The Organization of the Petroleum Exporting Countries (OPEC) on Thursday pointed to the risks of lower oil demand in the summer, due in part to production cuts announced by OPEC+ producers on April 2nd.
Some producers in the OPEC+ alliance, which includes the Organization of the Petroleum Exporting Countries and allies including Russia, announced on April 2 new voluntary cuts in production targets effective from May. The move pushed oil prices up to $87 a barrel from less than $80 a barrel.
oil stocks
But OPEC said in a discussion of the market outlook for the summer, which was published in its monthly oil report on Thursday, that oil stocks appear more plentiful and that global growth faces a number of challenges.
“OECD trade stocks have increased in recent months, and product stocks are less tight than they were at the same time a year ago,” OPEC said.
seasonal demand
The organization indicated that the usual increase in seasonal demand in the United States may be affected by any economic weakness due to raising interest rates, and that lifting Covid restrictions in China has not yet stopped a decline in refinery consumption of crude oil globally.
“It should be noted that potential challenges to global economic development include rising inflation, monetary tightening, financial market stability, high levels of sovereign debt, corporate debt and private debt,” OPEC added.
However, OPEC maintained its forecast of an increase in oil demand by 2.32 million barrels per day, or 2.3 percent, in 2023 and raised its forecast for demand from China. The outlook for global demand was unchanged for the second month in a row.
Economic growth
OPEC maintained its forecast for economic growth for its member states in 2023 at 2.6 percent and cited potential downside risks. However, it said the fallout from the US banking crises in March had had only a limited economic impact.
Oil prices fell following the release of the OPEC report, bringing Brent crude to around $87 a barrel.
Production decline
The report also showed that OPEC oil production declined in March, reflecting the impact of previous production cuts that OPEC Plus pledged to support the market, in addition to some sudden outages.
In November, with prices weak, OPEC+ agreed to cut production by 2 million bpd from its total production target, the biggest cut since the early days of the pandemic in 2020.
The voluntary cuts on April 2 bring the total production cut pledged by OPEC+ to 3.66 million bpd, or 3.7 percent of global demand.
OPEC reported that its production in March fell by 86 thousand barrels per day to 28.80 million barrels per day.
The report kept its forecast for the amount of crude oil that OPEC needs to produce in 2023 to make the market stable at 29.3 million barrels per day, indicating that there will be a deficit if OPEC continues to produce at the rate of March or makes other production cuts.
Source: Archyde.com
