2023 outlook

Global oil markets: another tumultuous year lies ahead

After the unprecedented challenges of 2022, what are the themes and trends set to have the biggest impact on global oil demand, supply and refining in 2023? How will the markets respond? Read our predictions.

In the full report:

  1. Oil market: economic uncertainty sets the tone
  2. Refining outlook: what’s coming and what could be disrupted?
  3. Is there still value in petrochemical integration?
  4. Signposts of adaption to the energy transition

3 minute read

The oil and refining markets endured another bumpy ride in 2022. At the start of the year, strong oil demand growth was forecast, as the economy continued its recovery from the global pandemic. But unprecedented challenges soon emerged.

In Europe, Russia’s invasion of Ukraine introduced huge geopolitical uncertainties and caused energy prices to soar. In China, the shadow of Covid-19 loomed large, with large parts of its petrochemical and manufacturing sector locked down for many months in the first half of the year.

Central banks abruptly switched tack as rocketing energy prices stoked inflation, though high prices certainly slowed demand growth. Recession fears escalated in the second half of the year. The EU’s crude import ban and G7 price caps have now also come into force, with the refined product import ban scheduled for 5 February 2023.

Against this tumultuous backdrop, what are the key themes and trends to watch in 2023? What fresh challenges lie ahead, and how will the oil and refining markets respond?

We shared our predictions in Global oil and refining markets: what to watch in 2023. Fill in the form for a complimentary copy, and read on for a brief introduction.

2022: oil supply growth outpaced demand

Global oil demand in 2022 grew over 2 million b/d from 2021, but remained just under 2 million b/d below pre-pandemic levels. Russian crude oil exports largely continued to flow, although they were mostly diverted away from Europe to India, China and Turkey.

As we had forecast, global oil supply growth outpaced demand growth by almost 2.5 million b/d year-on-year. Crude oil inventories re-built, and oil prices weakened towards year-end.

Pandemic-driven refinery closures, self-sanctioning by many European companies and low product export quotas from China tightened the refined product markets. Refining margins hit record highs during the summer months.

Economic uncertainty sets the tone for the oil markets in 2023

In Wood Mackenzie’s latest economic outlook, we expect some key economies to enter recession and the global economy to slump in 2023, before recovering in 2024. Global GDP is set for its weakest global expansion, outside of the pandemic and global financial crisis contractions, since 2001.

On the supply side, the key risk remains with Russia. However, early indications are that the EU crude ban is having minimal direct impact on Russian crude export volumes.

How does the economic outlook vary by region? How will that impact oil demand? And what’s our view of global oil supply growth? Read the full report to see charts on global liquids supply and demand.

Refining sector tightness should ease during 2023 with new sources of supply

We expect the refining sector tightness to ease in the year ahead. Over 1.4 million b/d of additional refining capacity is scheduled to become fully operational over the course of 2023. This will enable crude runs to increase to satisfy diesel/gas oil demand, easing the pressure the sector is currently facing.

Our forecast is for refining margins to remain elevated during the first half of 2023 before declining.

There are, however, several uncertainties that could disrupt this outlook, beyond the typical challenges of project completion and commissioning. This includes China’s product export policies, and the EU refined product import ban from Russia to be implemented in February.

How far will refining margins decline in the second half of the year? What other uncertainties could prove disruptive to our outlook in 2023? Find out in the full report.

Can petrochemical integration still deliver value?

Refinery-petrochemical integration has been the downstream trend to watch for some time. However, 2022 saw a marked reversal of its benefits. Steam cracker and aromatic margins collapsed from the middle of the year as the petrochemical industry destocked on the fear of recession. The record refining margins supported crude runs at the integrated sites, pushing chemical co-products into a weak market environment.

The 2023 outlook remains challenging for chemicals. But will there still be value uplift from petrochemical integration? Read the full report to find out more. Plus, get our view on how the global refining industry is adapting its investment strategy to the energy transition.

Fill in the form at the top of the page for your complimentary copy of Global oil and refining markets: what to watch in 2023.