August 17, 2023/CSL Research

In its Monthly Oil Market Report for August 2023, the Organization of Petroleum Exporting Countries and its allies (OPEC+) reported that the OPEC Reference Basket (ORB) advanced by 7.8% m/m to an average of US$81.06/bbl in July 2023 from an average of US$75.19/bbl in June 2023. However, the average oil price in July 2023 was down 25.32%y/y when compared with the average oil price of US$108.55/bbl reported in July 2022.

The global demand for oil in 2023 is estimated to grow by 2.4 million barrels per day (mbpd) to 102.01mbpd compared with 99.57mbpd in 2022. The Organization for Economic Cooperation and Development (OECD) region is estimated to contribute 46.02mbpd of the expected demand while the Non-OECD countries are expected to contribute 55.99mbpd to the total demand in 2023 with the highest demand coming from China and other parts of Asia, as their economies expand following the relaxation of the COVID-19 restrictions previously imposed.

Taking into consideration the continuous voluntary production cuts from members of OPEC and its allies, total oil production is expected to come in at 72.71mbpd in 2023 compared with the performance of 71.15mbpd in 2022 and the biggest supplies are expected to come from the United States of America and Russia. Despite efforts from OPEC+ to stimulate higher prices of crude oil, the Brent crude averaged US$79.73/b in 2023. The Brent crude oil price may have been adversely affected by China’s decision to purchase cheaper oil products from Iran and the implementation of reduced CO2 emission policies. Again, the high cost of borrowing in many economies could be adversely affecting oil prices as high interest rates lead to reduced economic activities and consequently, lower demand for oil.

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