November 28, 2022

WWW.ENERGYINTEL.COM

Benchmarking: 2023 Balances Point to Inventory Draw

  • Oil demand will grow by an average 1.65 million b/d in 2023, according to consensus as reflected in November forecasts.
  • Energy Intelligence is the most bullish on supply next year, estimating growth of 1.4 million b/d, nearly double consensus.
  • The consensus balance for 2023 points to a net draw of over 300,000 b/d.
  • Weaker fourth quarter 2022 consumption will result in a roughly balanced market for the year.

An analysis of November forecasts by four agencies shows that demand for hydrocarbon liquids will grow next year by an average 1.65 million b/d to about 101.3 million b/d, which compares to average growth of 2.2 million b/d this year.

Energy Intelligence is forecasting that liquids supplies in 2023 will grow by 1.4 million b/d to 100.7 million b/d, which is at the high range of consensus. By contrast, the International Energy Agency (IEA) and the US Energy Information Administration (EIA) both estimate that aggregate supply growth will be about 750,000 b/d.

Demand Outlook Trimmed

Consumption in 2023 is forecast to grow by an average 1.65 million b/d, down 100,000 b/d from last month’s forecasts, according to consensus.

Compared with October reports, changes in the demand outlook were minor. The exception was Opec, which reduced next year’s demand growth by 100,000 b/d to 2.2 million b/d. This remains at the high end of consensus.

At the low end is the EIA, which after an upward revision to this year’s demand now forecasts that 2023 consumption will increase by only 1.2 million b/d, reaching 100.7 million b/d. The EIA is now expecting GDP in the US to decline next year, resulting in a decline of overall energy consumption.

Energy Intelligence and the IEA both have 2023 demand growing by 1.6 million b/d, which amount to approximately an 100,000 b/d upward adjustment from October forecasts.

Created with Highcharts 9.0.0(million b/d)DEMAND GROWTH FORECASTS, 2023Energy IntelligenceIEAOpecEIADec'23Nov'23Oct'23Sep'23Aug'23Jul'23Jun'23May'23Apr'23Mar'23Feb'23Jan'23Dec'22Nov'22Oct'22Sep'22Aug'22Jul'221234Source: Energy Intelligence, IEA OMR, Opec MOMR, EIA STEO

Created with Highcharts 9.0.0(million b/d)DEMAND FORECASTS, 2023Energy IntelligenceIEAOpecEIANov'22Oct'22Sep'22Aug'229698100102104Source: Energy Intelligence, IEA OMR, Opec MOMR, EIA STEO

New Supply

Despite an anticipated decline in Russian production next year and Opec’s vow to manage supply, the world will see considerable volumes of new oil.

The IEA forecasts that non-Opec-plus producers will increase output in 2023 by 1.8 million b/d to 49.7 million b/d. Energy Intelligence is considerably more bullish and estimates this group’s barrels will grow by 2.5 million b/d to 50 million b/d.

Factoring in Opec-plus curtailments, total global supply will grow by 1.4 million b/d, we believe. This is more than the 800,000 b/d in aggregate supply growth forecast by the IEA.

The EIA does not indicate Opec-plus growth per se in its monthly Short-Term Energy Outlook, but world supply in 2023 will increase by 750,000 b/d to 100.7 million b/d. Of that, non-Opec supply, including countries like Russia that are part of the Opec-plus group, will grow by almost 500,000 b/d next year to 66.3 million b/d.

For its part, Opec does not forecast own output, but it does estimate that non-Opec liquids production, including countries like Russia, will grow by 1.4 million b/d next year to 67.1 million b/d.

Created with Highcharts 9.0.0(million b/d)NON-OPEC SUPPLY FORECASTS, 2023Energy IntelligenceIEAOpecEIANov'22Oct'22Sep'22Aug'2264656667Source: Energy Intelligence, IEA OMR, Opec MOMR, EIA STEO

Net Draw in 2023

Consensus is in agreement that global markets for hydrocarbon liquids will be slightly undersupplied next year and need to tap inventories to keep up with demand growth.

Energy Intelligence’s and the EIA’s balances both indicate a net draw of 300,000 b/d in 2023, while the IEA’s forecast, which is based on the current Opec-plus agreement plus capacity restrictions of member countries, points to an average draw of 700,000 b/d.

Opec does not forecast a global balance and instead highlights a call on its crude oil. In its latest report, the organization lowered the call on its crude next year by 200,000 b/d to 29.3 million b/d. This indicates year-on-year oil production growth of 700,000 b/d for the 13 members of Opec.

Consensus shows global markets are roughly in balance this year. However, Energy Intelligence departs from consensus and sees a supply deficit of 1.3 million b/d in October-December due to a 1.4 million b/d surge in demand.

By contrast, Opec and the EIA are forecasting fourth quarter consumption to grow by 900,000 b/d, while the EIA is projecting demand to rise by nearly 400,000 b/d during the three months.

This largely explains why Energy Intelligence’s 2022 balance currently shows a net draw of 160,000 b/d, while the other three agencies have a net surplus, ranging from the IEA’s 150,000 b/d to Opec’s 70,000 b/d.

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 Energy Intelligence Opec production forecast.
Source: Energy Intelligence, IEA OMR, Opec MOMR, EIA STEO


Gary Peach, New York