So far, both the US and the Euro-zone have experienced steady economic growth this year. Meanwhile, India, Brazil and Russia saw economic growths that clearly surpassed expectations. Moreover, the positive effects of China’s reopening have continued supporting global economic growth. However, global economic growth in 2H23 continues navigating through uncertainties including elevated key-policy rates, persistently high core inflation and a continued tight labour market. Moreover, it is still unclear how the geopolitical conflict in Eastern Europe will be resolved.

Since the beginning of the year, the main economic support, at the global level, from the services sector, especially travel and transportation, tourism, leisure and hospitality. On the other hand, the manufacturing sector’s dynamic has been very much lacklustre. This trend is expected to lead into the summer holiday season in the northern hemisphere, supported by still-sufficient disposable income levels, particularly in advanced economies. China is also benefitting from pent-up demand in the services sector after around three years of lockdowns. However, as the services sector-related spending tightens in 3Q23, inflation, financial tightening and rising geopolitical uncertainty, may dampen the growth dynamic towards the end of the year.

Turning to the oil market, global oil demand is forecast to grow by 2.4 mb/d y-o-y in 2H23. For the year, world oil demand is forecast to grow by 2.3 mb/d (see Graph 2). In the OECD, oil demand is estimated to increase by 0.2 mb/d in 2H23 y-o-y, driven mostly by the US and Asia Pacific. However, OECD Europe is anticipated to be weak. In terms of products, jet kerosene and gasoline are anticipated to be the drivers of demand in the region, while diesel is expected to be subdued by weak economic activity and geopolitically induced supply-chain bottlenecks. Naphtha is also anticipated to remain in a contraction zone due to weak petrochemical margins. In the non-OECD, the opening of China and better-than-expected performance in other countries of the region are expected to drive oil demand. Improving driving mobility and air travel recovery, as well as improvements in manufacturing sector activity, are projected to support jet/ kerosene, gasoline and distillate demand. Oil demand in the non-OECD is forecast to grow on average by 2.2 mb/d y-o-y in 2H23, with China remaining the largest contributor to oil demand growth. In terms of main products, jet fuel is expected to lead oil demand growth in the region, followed by gasoline and diesel, and supported by the “other products” category.

Following the estimated growth of 2.2 mb/d y-o-y in 1H23, the non-OPEC liquids supply is forecast to grow by 0.7 mb/d y-o-y in 2H23. For the entire year, the non-OPEC liquids supply is anticipated to grow by 1.4 mb/d y-o-y (see Graph 2). On a regional basis, OECD liquids supply is expected to grow by 1.3 mb/d y-o-y in 2H23, mainly in the US, with a projected increase of 0.8 mb/d, and
additional incremental production is expected to come from Norway and Canada. However, liquids supply from the non-OECD region is forecast to drop by 0.7 mb/d y-o-y in 2H23. Higher production from Latin America, Other Eurasia and China is forecast to be more than offset by lower output in Russia, amid uncertainty, particularly regarding US shale oil developments, which continue to dominate in 2H23.

Given the uncertainty in the world economy and global oil markets, the Declaration of Cooperation (DoC) countries have decided in their 35th OPEC and non-OPEC Ministerial Meeting to continue their precautious, proactive, and pre-emptive approach and hence maintain their production adjustments until end of 2024, while monitoring the market closely to support stability in the months to come.
Source: OPEC