Macro oils short-term outlook: December 2022 Report

Commodity Market Report 08 December 2022

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Report summary

The oil market is having a severe reaction to the decline in global demand this quarter due to renewed Covid lockdown restrictions in China and adding the risk of further weakening demand in 2023 due to possible interest rate hikes. However, we expect firmer fundamentals early next year and these will allow prices to stabilize. Key highlights this month include: • Impact of the EU Russia oil import ban and G7 price cap on Russia supply and exports • Assessment of recent accelerated supply growth in the US Lower 48 • Global demand to be supported by Middle East growth in 2023 • US SPR sales to end this month

Global supply: limited changes to the outlook as OPEC+ opts for a wait and see approach
- Non-OPEC supply: US Lower 48 growth accelerates; Russia production remains strong, for now
- Russia production strong ahead of implementation of EU oil ban and G7 price cap
- US Lower 48: growth takes sharp turn higher
- OPEC supply: OPEC+ agrees to continue with 2 million b/d production cut
Global demand: Outlook remains volatile as China struggles with Covid surge
- 2022: The recent Covid surge in China tempers the global demand recovery
- 2023: Annual growth is still in recovery mode but is tempered by economic slowdown
- 2024 Global demand recovers on an economic soft landing
- Risks to the outlook