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Record Global Oil Demand Boosted by Air Travel and China in 2023

The IEA presented its Oil Market Report (OMR) that details what happened in the world of oil. We will bring you the highlights of this report.

Global Oil Demand and Supply:

Global oil demand reached record levels due to high summer air travel, more oil used in power generation, and rising Chinese petrochemical activity.

World oil demand is predicted to increase by 2.2 mb/d to 102.2 mb/d in 2023.

China will account for over 70% of this growth.

In contrast, with post-pandemic recovery waning and the rise of electric vehicles, growth is expected to slow down to 1 mb/d in 2024.

Oil Production Insights:

Global oil production saw a drop of 910 kb/d to 100.9 mb/d in July.

A significant cut in Saudi Arabia's production led to a fall of 1.2 mb/d in OPEC+ block's output, while non-OPEC+ volumes rose by 310 mb/d.

Worldwide oil production is projected to rise by 1.5 mb/d to a record of 101.5 mb/d in 2023, with the US contributing the most, accounting for almost 80% of the global supply growth in 2023.

Inventories and Stocks:

Global oil inventories decreased by 17.3 million barrels in June, primarily led by the OECD.

OECD industrial stocks declined in line with seasonal trends, while non-OECD stocks remained mostly unchanged.

Preliminary data suggests global stocks increased further in July and August.

Price Dynamics:

Brent futures rose by $11 per barrel to $86 in July due to improved macroeconomic sentiment and decreased inflation.

Global oil prices saw a steady increase in July and early August,.

The deepening supply cuts from OPEC+ collided with improved macroeconomic sentiment, causing North Sea Brent to rise by $10/bbl to about $85/bbl.

Significant Points on OPEC+ and Non-OPEC:

OPEC+ alliance's oil supply dropped by 1.2 mb/d in July due to a voluntary cut from Saudi Arabia.

Production outside the OPEC+ alliance increased by 1.6 mb/d during the same period, with the US, Brazil, and Guyana leading the expansion.

Overall Market Outlook:

With Saudi Arabia and Russia expected to extend supply cuts till at least September, market balances are anticipated to tighten further in the fall.

If the current targets of OPEC+ are maintained, oil inventories could further reduce, posing a risk of even higher prices.

Air travel drives record global oil demand
Air travel drives record global oil demand

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