Oil Market Update: Demand Hopes Drive Recovery, OPEC Holds Estimates Steady
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The Commodities Feed: Oil recovers on demand hopes
Prospects of Chinese stimulus and an unchanged demand estimate from OPEC were supportive of oil prices yesterday with ICE Brent recovering to above US$74/bbl. For agriculture, CONAB has raised its corn and soybean production estimates for Brazil on favourable weather.
Energy – OPEC keeps supply demand estimates unchanged
OPEC released its latest monthly oil market report yesterday, in which it left global oil demand growth projections unchanged at around 2.3MMbbls/d for 2023 with global oil demand pegged at 101.9MMbbls/d. However. OPEC highlighted the uncertainties to this outlook due to global economic developments and ongoing geopolitical tensions that could change the demand dynamics.
On the supply side, non-OPEC supply growth estimates for the year were left unchanged at 1.4MMbbls/d with global non-OPEC oil supply estimated to be around 67.2MMbbls/d. The group continues to see the requirement for OPEC crude at around 29.3MMbbls/d for 2023 compared to the actual output of 28.8MMbbls/d for the first quarter and 28.1MMbbls/d in May 2023. OPEC’s crude oil production dropped by 464Mbbls/d in May 2023 due to supply cuts from Saudi Arabia (-519Mbbls/d) and the UAE (-140Mbbls/d).
Meanwhile, the API reported that the US crude oil inventories increased by around 1MMbbls over the last week, in contrast to the average market expectations of the addition of around 0.3MMbbls. Cushing crude oil stocks are reported to have increased by 1.5MMbbls. On the products side, API reported that gasoline and distillates inventories rose by 2.1MMbbls and 1.4MMbbls respectively, over the week ending 9 June. The more widely followed EIA report will be released later today.
The latest market reports suggest that the US could purchase around 12MMbbls of crude oil for its State Petroleum Reserves as soft crude oil prices provide comfort on the supply side. The abovementioned figure includes the 3MMbbls of crude oil that is scheduled for delivery in August and another 3MMbbls/d of purchase that the US approved last week. SPR witnessed a withdrawal of around 180MMbbls last year (pushing total SPR inventory to a 40-year low of 354MMbbls currently) due to crude oil supply shortages after the Russia-Ukraine war and these purchases are aimed to refill the inventory.
