August 23, 2022

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Benchmarking: Consensus Demand Outlook for 2022-23 Converges

  • Consensus has converged and now sees oil demand growing by 2.1 million b/d this year, while the range of forecasts for total annual consumption has narrowed.
  • For 2023, the range of demand growth is 1.9 million b/d to 2.7 million b/d, or an average of 2.3 million b/d.
  • Consensus is split on balances for next year, with one agency forecasting a net draw of inventories, another a net build and a third a balanced global market.

Oil forecasts for 2022-23 are at a crossroads. On the one hand, there is the salient risk of recession and the possibility of Iran pumping more oil — two themes that are flattening the price curve on the futures market. On the other are risks of Russian output falling and massive fuel switching this winter due to sky-high natural gas prices. Not surprisingly, volatility persists.

Forecasters are examining these and other factors and attaching various weights — and naturally arriving at different conclusions. In this month’s batch of forecasts, the International Energy Agency (IEA), for instance, raised 2022 demand growth by 380,000 b/d to 2.1 million b/d in anticipation of fuel switching later this year. By contrast, Opec lowered its forecast by 260,000 b/d to 3.1 million b/d after revising down estimates for US and China.

Forecasts for 2023, meanwhile, have been released, and the outlook is relatively bullish. Demand for hydrocarbons will grow to the tune of 2.3 million b/d based on average consensus, which is more than 2.1 million b/d for the current year.

Converging Outlooks

The demand outlook for 2022 has undergone a drastic revisions since January. Three of the four agencies surveyed for this report have lowered the outlook by at least 1 million b/d, while the US Energy Information Administration (EIA) has reduced it by 1.5 million b/d.

Aggregate demand for hydrocarbon liquids this year is now estimated between 99.4 million b/d and 100 million b/d — a relatively tight 600,000 b/d difference between the high and low ends among the four agencies surveyed for this report. At the start of the year the gap was 1.1 million b/d.

Three of four agencies, including Energy Intelligence, are now surprisingly similar: they are forecasting growth of 2.1 million b/d this year. Opec is the outlier, estimating that 2022 consumption will be a robust 3.1 million b/d.
Created with Highcharts 9.0.0(million b/d)DEMAND FORECASTS, 2022Energy IntelligenceIEAOpecEIAAug'22Jul'22Jun'22May'229698100102Source: Energy Intelligence, IEA OMR, Opec MOMR, EIA STEO

Created with Highcharts 9.0.0(million b/d)DEMAND GROWTH FORECASTS, 2022Energy IntelligenceIEAOpecEIADec'22Nov'22Oct'22Sep'22Aug'22Jul'22Jun'22May'22Apr'22Mar'22Feb'22Jan'22Dec'21Nov'21Oct'21Sep'21Aug'2112345Source: Energy Intelligence, IEA OMR, Opec MOMR, EIA STEO

In 2023, a curious picture has emerged with demand forecasts. Average growth among consensus is 2.3 million b/d, with Opec remaining the most bullish: its forecasts see consumption roaring ahead by 2.7 million b/d to 102.7 million b/d. Interestingly, the IEA and EIA are forecasting demand growth of 2.1 million b/d next year — the same level as for the current year.

Energy Intelligence, by contrast, is at the lower end of consensus, estimating that demand in 2023 will grow by 1.9 million b/d to 101.5 million b/d. Inflation will continue to bedevil the economic recovery, while limited refining capacity will put a solid floor under product prices and act as a choke on demand growth.

Surplus Now, Questions Later

Consensus now shows a surplus of hydrocarbon liquids in 2022, which wasn’t the case earlier this year. Demand expansion has been reined in, while non-Opec supply continues to ratchet up. There are more barrels to go around. A return of Iranian exports will only intensify this trend.

The average inventory increase this year is 460,000 b/d, based on balances in August reports. The IEA sees the largest build, or 900,000 b/d. The Paris-based agency bases its forecast on Opec-plus supply on a combination of the alliance’s current deal and individual country’s production capacity.

The EIA now forecasts inventory growth of 680,000 b/d, while Energy Intelligence’s balances show a build of 140,000 b/d. Importantly, we are the only agency among those reviewed that sees a draw in the fourth quarter this year — the result of declining Russian production and significant pre-winter fuel-switching.

Opec does not forecast own production, but using Energy Intelligence’s forecast for member countries’ output, the Vienna-based organization’s balance shows a 100,000 b/d build this year.

Created with Highcharts 9.0.0(million b/d)LATEST GLOBAL SURPLUS/DEFICIT ESTIMATESEnergy IntelligenceIEA*Opec†EIAQ1'22Q2'22Q3'22Q4'22-2-1012

*Reflects latest Opec-plus deal and member countries' sustainable capacity †Assumes Current EIG Opec Supply Forecast.
Source: Energy Intelligence, IEA OMR, Opec MOMR, EIA STEO


In 2023, a confusing picture emerges. The EIA is estimating a 160,000 b/d draw, while the IEA sees global markets roughly in balance, albeit with a slight draw.

Energy Intelligence, on the other hand, has forecast a 200,000 b/d inventory build next year. This will come about as a result of higher Opec production, particularly an additional 300,000 b/d in Iranian output by end-2023 compared to current levels. The UAE, which is itching to utilize more spare capacity, will also add about the same amount over the next 17 months.
Gary Peach, New York