BAKU, Azerbaijan, August 7. Amidst soft demand, the global oil market is experiencing a significant slowdown on the supply side, Trend reports.
BMI forecasts a notable decrease in global oil production growth, dropping from 4.2 million barrels per day (b/d) year-on-year in 2022 to just 274,000 b/d in 2023, before recovering to 1.4 million b/d in 2024. However, the production outlook varies considerably across different markets, with non-OPEC producers witnessing substantial gains, while the OPEC+ group maintains a tight grip on its supplies.
The OPEC+ coalition has been instrumental in supporting the market this year. Specific members of the group implemented an additional 1.16 million b/d production cut in May (to be effective until December), and Saudi Arabia voluntarily added a further 1 million b/d unilateral cut in July, extending it into August. While Saudi Arabia plans to restore the 1 million b/d to the market later this year, it is prepared to stagger or delay the return if needed to safeguard oil prices. Although the OPEC+ group does not have further cuts planned for 2023, they would likely act in response to substantial and sustained price declines. The deal has been extended from December 2022 to December 2024, signaling continued constraints on supply for the foreseeable future.
On the downside, an ongoing dispute between Ankara and Baghdad is currently causing shut-ins of approximately 450,000 b/d of Iraqi exports. These exports could resume at any point, and while Iraq is technically producing slightly below its OPEC+ quota even with the current outages, its historical compliance with the deal is relatively poor. A significant growth in production is anticipated once the dispute is resolved. However, neither side appears willing to yield at this stage, and there are no signs of an immediate resumption of crude flows.
Additionally, Russian crude exports are showing signs of weakness, with the four-week rolling average at the end of July reaching its lowest level since January. Moscow committed to a 500,000 b/d production cut in February in response to Western sanctions but failed to deliver on it. In July, Russia recommitted to a 500,000 b/d cut for August, targeting exports instead of output, likely due to behind-the-scenes pressure from Riyadh. Higher domestic refinery throughput contributed to a significant portion of recent export declines, but exports seem to be trending downward, suggesting a potential further decrease in supplies in August, in line with Moscow's commitment.
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