In its February Short-Term Energy Outlook (STEO), the US Energy Information Administration (EIA) has revised its outlook for Russia and China after its January STEO highlighted oil demand in China and oil production in Russia as two of the main uncertainties in the oil market this year.
“The revisions result from China relaxing COVID restrictions, which have increased our forecast of oil demand growth. At the same time, more oil was produced in Russia than we anticipated during January, and we raised our forecast for Russia’s oil production through the end of 2024,” EIA said.
In the February STEO, EIA expects global liquid fuels consumption to increase by 1.1 million b/d in 2023 and by 1.8 million b/d in 2024, driven primarily by growth in China and other non-OECD countries.
EIA forecasts that the reversal of restrictions will contribute to oil demand in China increasing by 730,000 b/d in 2023 and by 370,000 b/d in 2024. EIA expects OECD oil demand to remain largely flat over the forecast period, as inflationary economic pressures continue to limit GDP and oil demand growth and as the oil intensity of OECD economies declines.
However, “the outcomes of our demand forecast remain uncertain as China shifts away from its zero-COVID-19 policy and global economic conditions evolve,” EIA noted.
Global liquid fuels production averaged about 100 million b/d in 2022, and EIA forecasts it will increase by an average of 1.1 million b/d in 2023 and 1.5 million b/d in 2024. Growth in non-OPEC production in both 2023 and 2024, as well as increases in OPEC output in 2024, will mostly offset a 1.1 million b/d decline in Russia’s production over the forecast period.
EIA now expects oil production in Russia to average 9.9 million b/d in 2023, down 1.1 million b/d from 2022. Its latest forecast, Russia’s 2023 production is 400,000 b/d more than forecast in the January STEO because crude oil liftings data suggest that Russia’s exports have remained higher than the agency expected following the European Union (EU)’s ban on seaborne imports of crude oil from Russia that began on Dec. 5, 2022.
“However, we still forecast Russia’s oil production to fall in the coming months,” EIA said, as the ban “will cause refineries in Russia to reduce crude oil inputs, which will disrupt crude oil production,” EIA said.
Meantime, EIA has lowered its forecast for oil production in OPEC because of rising global oil inventories.
“These changes have largely offset each other in our forecast global balances, and beyond the first quarter of 2023, we have left our crude oil price forecast largely unchanged from last month’s outlook,” EIA said.