Global oil demand to grow in H2 2023 amid ongoing economic uncertainty – OPEC

LONDON (ICIS)–Global oil demand is forecast to grow by 2.4m bbl/day year on year in the second half of 2023 amid ongoing economic uncertainties, OPEC said on Tuesday.

Elevated interest rates, persistently high core inflation and a continued tight labour market would remain a challenge, the oil cartel said in its monthly oil market report.

Services have provided the main economic growth support so far this year with manufacturing lagging behind.

“This trend is expected to lead into the summer holiday season in the northern hemisphere, supported by still-sufficient disposable income levels, particularly in advanced economies.

“China is also benefiting from pent-up demand in the services sector after around three years of lockdowns.”

OPEC warned that its generally positive outlook could be dampened later in the year when services-related spending tightened in the third quarter, as well as any potential impact from inflation, financial tightening and rising geopolitical uncertainty.

In the OECD, second-half oil demand is estimated to increase by 200,000 bbl/day, driven mostly by the US and Asia Pacific. OECD Europe was anticipated to be weak, however.

For oil products, jet kerosene and gasoline were anticipated to be the drivers of demand in OECD Europe, while diesel was expected to be subdued by weak economic activity and geopolitically induced supply-chain bottlenecks.

Naphtha was also anticipated to remain in a contraction zone due to weak petrochemical margins, OPEC said.

In the non-OECD, the opening of China and better-than-expected performance in other countries of the region were expected to drive oil demand.

Oil demand in the non-OECD was forecast to grow on average by 2.2m bbl/day in the second half year on year, with China remaining the largest contributor to oil demand growth.

In terms of main products, jet fuel was expected to lead oil demand growth in the region, followed by gasoline and diesel.

OPEC’s world oil demand growth forecast for the whole of 2023 was broadly unchanged from its previous monthly report at 2.3m bbl/day. China, Latin America, and the Middle East were revised up slightly, while OECD Europe, Other Asia (ex-China) and Africa were adjusted slightly lower.

Front page picture shows the OPEC sign outside the headquarters in Vienna (image credit: MAX BRUCKER/EPA-EFE/Shutterstock)