OPEC sees large oil market deficit this year

Monthly oil market report from OPEC has been released today. Report showed that the cartel expects a much larger oil market deficit this year than it was earlier anticipated. Larger deficit is expected due to a decision to lower OPEC output target. Interestingly, OPEC did not change its demand forecasts as well as ex-OPEC supply forecasts:

• Production cut was driven by uncertainty around demand
• High interest rates are boosting uncertainty over demand during summer period
• Demand increase forecast for 2023 was left unchanged at 2.3 million barrels per day
• Forecast on increase in 2023 ex-OPEC supply was left unchanged at 1.4 million bpd
• OPEC production dropped by 86k bpd in March, to 28.8 million bpd
• Forecast on demand for OPEC oil was left unchanged at 29.26 million barrel per day

OPEC expectations on oil market balance this year. Source: Bloomberg

On the other hand, EIA is not so certain over the impact of OPEC+ decision to cut supply - EIA still expects oversupply. However, this is most likely driven by expectations of deterioration in the economic situation. It looks like OPEC may be failing to notice a potential economic slowdown by keeping demand forecast unchanged and simultaneously slashing output.

In spite of OPEC+ output cuts, EIA still expects (although minimal) oversupply on the oil market in the second half of 2023. Source: EIA

WTI (OIL.WTI) broke above the trading range as signs of recovering short-term demand provided lift for prices. The $82 per barrel area is key to watch this week. A weekly close above this level could hint at a potential upward move towards the $85-87 azone. On the other hand, investors should keep in mind that any signs confirming the deteriorating economic picture could see oil prices slide. Source: xStation5