Between April 12–May 4, 2023, the Brent crude oil price fell $16 per barrel (b) to $73/b; the West Texas Intermediate crude oil price fell $15/b to $69/b. The recent price declines are caused by a combination of supply and demand market factors, according to the EIA’s May Short-Term Energy Outlook (STEO).
On the demand side, news of a decrease in China’s manufacturing purchasing managers’ index (PMI), an indicator of economic conditions, added to market concerns about China’s economic growth and a possible US recession. Concerns about the banking sector after First Republic Bank was closed and subsequently sold also added to concerns about global economic growth and oil demand.
On the supply side, oil flows from Russia have remained higher than expected, increasing global oil supply and putting downward pressure on crude oil prices. However, in April 2023, OPEC+ members agreed to cut oil production through 2023. OPEC total production of liquid fuels are expected to decline from 34.0 million barrels per day (b/d) in April to average 33.7 million b/d for the rest of 2023.
In addition to the EIA’s expectation that OPEC+ countries will adhere to voluntary production cuts, recent disruptions to crude oil exports from Iraq and a force majeure limiting crude oil exports from Nigeria have also reduced the EIA’s near-term OPEC liquid fuels production forecast. It is expected that these supply constraints will put upward pressure on crude oil prices. In 2024, OPEC liquid fuels production are projected to increase by 0.7 million b/d to 34.4 million b/d, driven by an end of the currently agreed upon OPEC+ production cuts in 2023.
The Brent crude oil price may increase from $74/b in May 2023 to $79/b in September before declining slightly to average $78/b in the last three months of 2023. The West Texas Intermediate price is expected to follow a similar path.
ALCHEMPro News Desk (NB)
Receive daily prices and market insights straight to your inbox. Subscribe to AlchemPro Weekly!
marketing@alchempro.com
