The year-end is close, but the global demand for crude oil is not turning sanguine. The prices closed lower two days ago as the OPEC reduced its global oil demand forecast recently. Though prices received a slight lift from the reduction in China’s anti-COVID measures and restriction , the primary reason by the cartel were the uncertainties surrounding the global oil supply, the economic challengeslike high inflationand interest rates, and China’s still-strict Zero-COVID policy. The outlook for crude oil supplyin 2023 remain volatile as demand still lacked luster in the post COVID consumption.
The larger picture remained gloomy as this is the fifth cut in global crude oil demand by OPEC since April earlier this year. Moreover, what OPEC believes could turn tables for the global oil demand forecast is the resolution of Russia’s war in Ukraine.
Conservative yet less gloomy outlook has been forecast by the International Energy Agency (IEA). In its latest monthly Oil Market Report (OMR), the organization weighed the myriad of headwinds for meaningful recovery in global crude oil demand in 2023. the energy watchdog goes one step ahead and highlights that these headwinds that include china’s weak economic growth, Europe’s energy crisis, higher prices and margins, and strong dollar will continue to restrict any significant recovery till at least the frost half of the next year. IEA highlightedhigh diesel prices as a key factor fuelling inflation and burdening the global economy. But it also mentioned that global production is still expected to outpace demand for the rest of 2022despite the likely drop over the next two months.
Overall, it can be seen that that economic hiccups being faced by major economies like the USA and the UK, and China will continue to restrict demand for crude oil in the coming year. And apart from the general crude oil market dynamics, the crude oil supremacy over natural gas is also eroding as Europe and the USA build up gas stocks to combat the already-started harsh winter season.
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