The global crude oil price had been stuck near $75 since May this year. After resisting the prevailing pessimism for oil prices since end of June 2023, the crude oil prices have started increasing - touching 10-week high recently, and that has been because of weakening US dollar, forecast for higher demand for oil by the developing countries, and the supply cuts by the oil producing countries including OPEC.
The US dollar has been losing value as the FED has signaled the soon-to-end of its tightening cycle. The US dollar has come down to it two-month low, making crude oil more affordable for other countries and also stimulating demand further.
At the same time, the supply cuts have been extended by major oil exporters including Saudi Arabia and Russia – both part of the OPEC+ cartel. These supply cuts have been slated for August as well, boosting oil prices. The Kingdom of Saudi Arabia has announced it unilateral production cut of one million barrels of oil per day at least till August-2023, while Russia is likely to cut production by 500,000 barrels per day next month, i.e. August 2023.
The EIA forecast shows that the global demand will likely outpace supply by around 100,000 barrels per day in 2023 and by 200,000 barrels per day in 2024. Its recent outlook raised the 2023 world oil demand growth forecast by 170,000 barrels per day, and projects the crude oil price to reach $80 a barrel in the fourth quarter of the year. OPEC is also expected to maintain its bullish outlook for oil demand in 2024 in its upcoming outlook. For 2023, the oil cartel in its June report highlighted that the demand for oil in 2023 will be up by 2.4 percent year-on-year. Moreover, EIA and IEA forecast indicate demand surpassing supply in the coming years.
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