OPEC: How Robust Demand, US Hurricane Season Could Tighten Oil Market

Emmanuel Addeh in Abuja

Potential fuel production outages during the upcoming United States hurricane season could tighten the Atlantic Basin market in the coming weeks, OPEC said in its Monthly Oil Market Report (MOMR).

The cartel is upbeat on the “stability of the global oil market” amid lower-than average gasoline and middle distillate inventories in the United States and Europe and expectations of healthy fundamentals in the second half of 2023.

 “Despite the current elevated level of global refinery runs, gasoline and middle distillate stocks remain well below the latest five-year averages in the US and Europe,” OPEC said in its feature article in the report.

“Looking forward, refinery maintenance and potential production outages during the US hurricane season could potentially tighten the Atlantic Basin market, hence prompting stronger economic incentives for East-to-West product flows,” the cartel’s economists wrote in the report, cited by oilprice.com.

At the same time, expectations of robust oil demand in the second half of the year, plus the OPEC+ readiness to intervene on the market at any time and as needed, “will ensure stability of the global oil market,” OPEC said.

Moreover, OPEC noted that the outlook for oil market fundamentals improved in July, which was reflected in the strengthening of the market structure as all major oil futures prices turned to a firm backwardation structure.

OPEC left its forecast for global oil demand growth in 2023 unchanged from last month’s report, and expects demand growth at 2.4 million barrels per day . This year’s total global demand is expected to average 102.0 million bpd.

For next year, the cartel sees world oil demand rising by another 2.2 million bpd compared to 2023, thanks to solid global economic growth and continued improvements in China which are expected to boost consumption. In 2024, OPEC expects total world oil demand to average 104.3 million bpd.