At the end of Q1'23, Brent price was down 26.1% YoY at $79.77 per barrel. However, the commodity fared better between January 2023 and March 2023, with a related contraction of only 7.2% and a higher mean price of $82.22 per barrel. The downward pressure on the crude price primarily reflected unique demand and supply side triggers. The demand outlook for crude was further negatively affected by concerns stoked by the decline in China's leading growth/demand indicator — Purchasing Managers' Index (PMI), in April 2023 to 49.2 from 51.9 in March 2023. In addition to the concerns over China, the collapse of Silicon Valley Bank, Signature Bank, First Republic Bank, and UBS's rescue acquisition of Credit Suisse heightened apprehensions regarding global economic growth and oil demand. Thus, aided by the higher-than-expected output from Russia, which increased the global oil supply, crude prices experienced downward pressures in the period.
In response to the price pressures, OPEC+ members, led by Saudi Arabia, agreed to implement further oil production cuts in June 2023. The planned production cuts are expected to commence in July 2023 and extend through 2024. These cuts exclude Saudi Arabia's one million barrels per day output reduction (now extended to August) and Russia's plans to cut 500,000 barrels of its oil output next month. Consequently, the Energy Information Agency (EIA) revised its forecast OPEC liquid fuels production for the rest of 2023 to 33.4 million bpd vs 34.0 million bpd previously. The lower OPEC liquid fuels production forecast also reflects the recent disruptions in crude oil exports from Iraq.
Looking ahead, the EIA forecasts OPEC petroleum and other liquid fuels production to average 33.9 million bpd in 2024, down 1.2 million bpd from the peak of 35.1 million bpd in September 2022. These developments are expected to exert upward pressure on crude oil prices in 2023 through 2024. On the demand front, the EIA expects global liquid fuel consumption to increase by 1.8 million bpd and 1.6 million bpd in 2023 and 2024, respectively. Non-OECD Asian countries led by China and India are expected to drive most of the demand growth. Specifically, China's liquid fuel consumption is forecast to rise by 0.8 million bpd and 0.4 million bpd in 2023 and 2024, respectively. On balance, the EIA now projects Brent spot prices to average $79.50 per barrel in 2023 and $83.50 per barrel in 2024, compared with its previous forecasts of $78.60 per barrel in 2023 and $74.50 per barrel in 2024.
