Macro oils short-term outlook: October 2022 Report

Commodity Market Report 07 October 2022

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Report summary

It sounds shocking: OPEC+ agrees to a 2 million b/d production cut. However, the devil is in the details. The impact of the agreement is muted in our analysis by the fact the reductions are from the OPEC+ target, not actual output. Secondly, we have made downward revisions to global oil demand for 2023 that soften the effect of the expected impact on OPEC+ production. The net effect is relatively light, with a small downward adjustment to our price forecast for next year. We continue to expect an upward trend for oil prices mostly due to the initial impact of the EU Russia oil import ban. See our Macro Oils Monthly Update for more on: • Short-term forecasts through 2024 • What are the sources of demand growth in 2023 despite weakening economic performance • Russia: further pressure expected on production volumes as the EU embargo takes effect • The impact of the OPEC+ agreement on November and 2023 supply

Global supply: OPEC+ agreement for a 2 million b/d cut leads to a downward revision for 2023 supply.
- Non-OPEC supply: Upgrades to US Lower 48 offset by downgrades to Kazakhstan and Russia
- US Lower 48: growth remains slow and steady
- Outlook extended to 2024: growth from US is supported by Kazakhstan, Guyana and Brazil
- OPEC supply: OPEC+ agrees to a 2 million b/d production cut from November
Global demand: Annual growth at risk as economic storm clouds gather
- 2022: Potential gas-to-oil switching insufficient to offset demand losses
- 2023: Annual growth at risk
- 2024: Global demand recovers on an economic soft landing
- Risks to the outlook