OPEC+ report due on May 11: Will the market get clues on another output cut?

OPEC and its allies, together known as OPEC+, agreed last month to cut production by 1.16 million barrels per day (bpd) from May through to the end of the year. This output cut of over 1 million bpd follows a cut of 2 million bpd that was announced in October 2022, when the cartel had agreed to cut production from November till the end of 2023 despite calls by the US to pump more oil. The two output reductions account for about 3 percent of the world’s oil supply.

Oil prices surged over 8 percent to $83.95 a barrel after the announcement, the highest rise in more than a year. This came after benchmark Brent crude fell to $72 per barrel in March 2023, the lowest in 15 months, due to the collapse of major global banks including Silicon Valley Bank (SVB) and Credit Suisse.

With the supply cut and demand recovery in China, oil prices may again surge to the levels of $100 per barrel, last seen in July 2022.

OPEC+ have said that their meeting in early June will be in person in Vienna rather than a virtual one. Experts say that this indicates the cartel is looking to be more active in supporting oil prices and that further output cuts might be forthcoming.

Also Read: Oil prices end 3-day rally on US inflation anxiety, unexpected rise to inventories

Here are the top highlights from OPEC’s monthly oil report for April 2023:

-The world economic growth forecast for 2022 is revised up slightly to 3.3 per cent, given better-than-anticipated economic performance in 2H22 in various key economies. The 2023 global economic growth forecast remains unchanged at 2.6 per cent.
-The world oil demand growth estimate for 2022 remains at 2.5 million barrels per day (mb/d), broadly unchanged from March’s assessment. For 2023, it is also unchanged from the assessment at 2.3 mb/d in March 2023. 
-The non-OPEC liquids supply growth estimate for 2022 remains at 1.9 mb/d, broadly unchanged from the assessment in March 2023 The main drivers of liquids supply growth for 2022 were US, Russia, Canada, Guyana, China and Brazil, while the largest declines were from Norway and Thailand.
– For 2023, non-OPEC liquids supply growth remains broadly unchanged from March and is forecast to grow by 1.4 mb/d. The main drivers of liquids supply growth are expected to be the US, Brazil, Norway, Canada, Kazakhstan and Guyana, while the decline is expected primarily in Russia.
-In 1Q23, world oil demand is estimated to have grown by a healthy 2.1 mb/d year-on-year, on the back of a rebound in China’s oil demand and oil demand data in other non-OECD regions, particularly the Middle East and Asia. 
-The world oil demand is expected to grow by around 2.4 mb/d year-on-year in 2Q23, 2.5 mb/d year-on-year in 3Q23 and 2.3 mb/d year-on-year in 4Q23.
-In terms of products, the global demand for petrol and diesel is forecast to increase by 0.6 mb/d and 0.5 mb/d, year-on-year respectively, in 2Q23. In 3Q23, the demand for these two products is forecast to improve further, with global petrol demand growth forecast at 0.7 mb/d and diesel at 0.6 mb/d, year-on-year.