Crude futures set to decline 3% on the week after slashed demand forecasts
Front-month ICE Brent has increased by $0.57/bbl on the day, to $93.90/bbl at 09.00 GMT.
PHOTO: Russian oil exports declined by 230,000 b/d to 7.5 million b/d in September, while its production was 1.26 million b/d short of its 11.03 million b/d target. Getty Images
Upward pressure:
Several analysts and investment banks have upped their Brent price forecasts after last week's OPEC+ announcement of a cut to production quotas of a combined 2 million b/d, starting from November.
Dutch financier ING has said that if OPEC+ producers are compliant with the cuts, they will completely change the oil supply-demand balance for the rest of the year and into next year. ING now expects a "large deficit" next year and will revise its price forecast of $97/bbl up.
OPEC+'s supply cut and the EU's impending embargo on Russian oil will contribute to keep global supply tight going forward, Morgan Stanley has noted. It has also raised its oil price forecast for the first quarter of 2023 by $5/bbl to $100/bbl.
Investment bank UBS has forecast that Brent will move above the $100/bbl mark over the coming quarters. It expects oil markets to tighten further.
Downward pressure:
The International Energy Agency (IEA) has slashed its forecast for oil demand growth for 2022 and 2023, and warned that higher oil prices may trigger a recession.
In the current fourth quarter, the IEA expects economic headwinds to drag down demand growth by 340,000 b/d to 1.9 million b/d, and by 470,000 b/d to 1.7 million b/d next year.
Russian oil exports declined by 230,000 b/d to 7.5 million b/d in September, which is 560,000 b/d lower than before its invasion of Ukraine, the IEA has said. Shipments to the EU dropped by 390,000 b/d compared to August.
The IEA predicts that EU countries have already replaced more than half of their total pre-war crude oil imports from Russia. The rest of these imports are set to dry up as the EU's embargo takes effect from 5 December.
Russia's oil production has already fallen 1.26 million b/d short of its target of 11.03 million b/d, and is expected to decline further to 9.5 million b/d by February 2023, according to the IEA.
Russia has been the biggest underproducer compared to its OPEC+ production quota among the group’s members, but several other members like Nigeria have also failed to meet their production quotas.
Therefore, the IEA has predicted that OPEC+ output is more likely to decline by 1 million b/d in November, instead of the combined 2 million b/d that was agreed last week.
The core OPEC group has also lowered its forecast for global oil demand growth this year, trimming it by 460,000 b/d to 2.64 million b/d. It expects demand growth to weaken by a further 360,000 b/d next year, to 2.34 million b/d, citing weaker global demand and inflationary concerns.
By Konica Bhatt
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