Two wild cards dominate the 2023 oil market outlook: Russia and China.
According to the International Energy Agency’s oil market report for January, 2023 could see oil demand rise by 1.9 million barrels per day (mb/d) to hit 101.7 mb/d – the highest ever. It could tighten the balance as Russia’s supply choke continues under the full impact of sanctions.
The IEA said China will drive “nearly half this global demand growth” even as the shape and speed of its reopening remain uncertain. China’s reopening will unlikely be a smooth path and the recovery in oil demand is not certain, the IEA said, pointing to “massive underreporting” of covid cases and a weak economy.
Forecasts see a slow demand recovery in the first half of 2023.
The IEA predicts that world oil supply growth in 2023 is set to slow to one mb/d following last year’s OPEC+-led growth of 4.7 mb/d. An overall non-OPEC+ rise of 1.9 mb/d will be tempered by an OPEC+ drop of 870,000 b/d due to expected declines in Russia.
In the last quarter of 2022, supply outpaced demand by over one mb/d despite OPEC’s production cut and disruptions to US supply due to winter storms. Demand was also restrained by China’s covid-19 lockdowns and winter blizzards. As a result, the oil demand contracted by a massive 910,000 b/d year-on-year in the Organisation for Economic Co-operation and Development (OECD) countries and by 130,000 kb/d y-o-y in China.
In the top ranks as the world’s leading source of supply growth, the United States, along with Canada, Brazil and South America’s rising oil star – Guyana.
Guyana has two projects producing, two more approved and a fifth awaiting government approval.
ExxonMobil, operator of the country’s largest block, has asked the Environmental Protection Agency to commence an authorisation process for its sixth project – the Whiptail development.
Exxon has made over 30 discoveries offshore Guyana since 2015 and estimates reserves to be around 11 billion barrels of oil equivalent in the offshore Stabroek Block.