Macro oils short-term outlook: July 2022 Report

Commodity Market Report 07 July 2022

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Report summary

After the 20% slide early in July, crude oil prices are unlikely to continue on a steady downward slope. Crude production for some OPEC producers remains under downward pressure while the Iran nuclear deal seems to be retreating. The agreement to ban Russia imports into the EU takes effect late this year which provides a level of upward price risk. Adding further uncertainty around supply, on 5 July, a Russian court ordered the CPC pipeline must shut down for 30 days. The pipeline is Kazakhstan's dominant oil export corridor. Highlights of our early July Macro Oils Monthly Update include: • We continue to forecast slow growth in US Lower 48—contrary to consensus earlier this year • OPEC production is slated to increase this quarter; helping meet demand even if below its target • Demand growth for 2022-2023 stable in this outlook although clearly affected by high prices • Effect of a recession on demand in 2023 would be 3 million b/d downward adjustment

Global supply: OPEC+ sticks with the current plan as disruption impacts Nigeria and Libya supply
- Non-OPEC supply: upward revisions to Mexico and Russia offset downgrades to Norway
- US Lower 48: majors and privates in growth mode, but independents show restraint
- OPEC: OPEC+ agrees to continue increases in August; plans for September to be confirmed
Global demand: Inflation continues to temper the post-Covid recovery
- 2022: Global demand to break above 100 million b/d in Q4, but will fall short of 2021
- 2023: Demand to extend gains above 101 million b/d but risks remain as to global economy