July 6, 2023/CSL Research

In its monthly oil market report for June 2023, the Organisation of Petroleum Export Countries (OPEC) estimates that global oil demand will settle at 101.91 million barrels per day (mbpd) at the end of 2023 implying a 2.3% y/y growth in demand from 99.6mbpd in FY2022, with most of the demand expected to come from China (15.70mbpd), Other Asia (9.35mbpd) and Middle East (8.67mbpd) respectively. On the flip side, world oil supply is expected to grow to 72.6mbpd (+2.11%y/y) from 71.10mbpd in FY 2022.

On the domestic front, Nigeria’s oil rig count rose to 13 (as of May 2023) compared with 11 rigs in Q1 2023 and 10 performing oil rigs for FY 2022. This was largely driven by efforts by the Federal Government to clamp down on oil bunkering and theft in the Niger-Delta Basin. With the implementation of anti-theft measures on crude oil products from oil producing areas of the country, Nigeria may gradually raise its levels of oil production amid the expected production cuts as agreed with the international oil cartel, OPEC and its allies.

As a way to elevate global prices, Saudia Arabia extended its 1 mbpd production cut to August 2023.while Russia agreed to reduce its crude oil exports by 500,000bpd. However, this will likely be insufficient to push global prices from current levels of $78.33 to the levels seen last year (crude oil prices rose to as high as US$119.0/bbl as at 06 Jun 2022) as extraneous factors such as the Russia/Ukraine war, economic sanctions on Russia and its retaliations amongst others reduced global oil supply and pushed prices up at that time. Also, the alternative clean energy agenda has been negating a swift bullish run-in global oil prices as countries in Europe adopt more low emission policies. However, the reduction of COVID restrictions and the recovery of economic activities in China (second highest consumer of crude oil products) may support the Brent crude oil price in the second half of the year.

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