The OPEC Reference Basket (ORB) crude rose $1.94, or 2.4%, m-o-m in January to average $81.62/b. The ICE Brent front-month increased by $2.57, or 3.2%, to average $83.91/b, and NYMEX WTI rose by $1.64, or 2.1%, to average $78.16/b.
The Brent/WTI futures spread widened m-o-m, rising by 93¢ to average $5.75/b. The market structure of ICE Brent strengthened in January, and the first-to-third month spread flipped into backwardation. However, the forward curve of NYMEX WTI weakened further, and the first-to-third month spread moved into deeper contango.
Hedge funds and other money managers raised their combined futures and options net long positions in January in both ICE Brent and NYMEX WTI, compared to December’s low levels.
The world economic growth forecast for 2022 is revised up slightly to 3.1%, given the better-than-anticipated 2H22 economic performance in various key economies.
The 2023 global economic growth forecast is also revised up slightly to 2.6% with some of the 2H22 momentum carrying over into 2023. For the US, the economic growth forecast is revised up to 2.1% for 2022 and 1.2% for 2023.
Similarly, the Euro-zone’s economic growth is revised up to 3.5% for 2022 and 0.8% for 2023. Japan’s economic growth forecast remains at 1.2% for 2022, but is revised up to 1.2% for 2023. China’s economic growth forecast for 2022 is revised down to 3%, but is revised up to 5.2% for 2023.
India’s economic growth forecast remains unchanged at 6.8% for 2022 and 5.6% for 2023. Brazil’s economic growth forecast remains at 2.8% for 2022 and is also unchanged at 1% for 2023. The 2022 economic growth forecast for Russia is revised up to a contraction of 3.5%, followed by a small contraction of 0.5% in 2023, unchanged from last month.
While principally the current economic momentum provides a good base for this year’s growth, a slowing dynamic for the year is still likely with inflation remaining high and further lifts in key interest rates, particularly in the Euro-zone.
The world economy will continue to navigate through numerous challenges including high sovereign debt levels in many regions and geopolitical developments.
World Oil Demand
The world oil demand growth forecast for 2022 remains unchanged from last month’s assessment at 2.5 mb/d. The OECD demand in 4Q22 was adjusted downward to reflect the latest data but non-OECD demand in 4Q22 was revised higher due to improvements in economic activity in some countries and a slight recovery in oil demand in China after the lifting of its zero-COVID-19 policy.
For 2023, world oil demand growth is adjusted slightly upwards by 0.1 mb/d to stand at 2.3 mb/d. The OECD is projected to grow by around 0.4 mb/d and non-OECD at about 2.0 mb/d.
World Oil Supply
Non-OPEC liquids supply is estimated to have grown by 1.9 mb/d in 2022, broadly unchanged from the previous assessment. Downward revisions to Other Eurasia, OECD Europe and Other Asia were largely offset by upward revisions to liquids production in Russia.
The main drivers of liquids supply growth for 2022 are seen to be the US, Russia, Canada, Guyana, China and Brazil, while the largest declines are expected from Norway and Thailand. For 2023, non-OPEC liquids production growth is revised slightly down by 0.1 mb/d from last month and is forecast to grow by 1.4 mb/d.
The main drivers of liquids supply growth are expected to be the US, Norway, Brazil, Canada, Kazakhstan and Guyana, while declines are forecast in Russia and Mexico. Nevertheless, large uncertainties remain over the impact of ongoing geopolitical developments, as well as US shale output in 2023.
OPEC NGLs and non-conventional liquids are forecast to grow by 0.1 mb/d in 2022 to average 5.39 mb/d and by 50 tb/d to average 5.44 mb/d in 2023. OPEC-13 crude oil production in January decreased by 49 tb/d m-o-m to average 28.88 mb/d, according to available secondary sources.