OPEC reduces 2023 oil demand outlook by 1 lakh bpd to 29 mbpd, Saudi output cut leads to 3 mbpd shortfall

The Organisation of Petroleum Exporting Countries (OPEC), in its latest monthly oil market report for September, has revised down the global oil demand for 2023 by 1 lakh barrels per day to 29.2 million barrels per day (bpd) - which is 8 lakh bpd higher than 2022. The oil cartel has also cut the 2024 demand outlook by 1 lakh bpd to 30 mbpd. The report comes days after Saudi Arabia and Russia, two of the most prominent members of OPEC and its allies (OPEC+) extended their voluntary oil supply cuts of 1.3 mbpd till the end of the year.

Global oil markets face a supply shortfall of more than 3 mbpd in the next quarter — potentially the biggest deficit in more than a decade — as a result of Saudi Arabia's extended output cuts. The latest data published by OPEC show why the kingdom’s supply squeeze, amid a period of record demand, has sent oil prices surging beyond $90 a barrel.

OPEC+ has pumped an average of 27.4 mbpd so far this quarter, or roughly 1.8 million less than it believes consumers needed, according to the OPEC report. If the organization keeps output unchanged, as group leader Saudi Arabia has signaled it plans to do, the gap between supply and demand will almost double in the final three months of the year. 

OPEC estimates it needs to provide 30.7 mbpd in the fourth quarter to fulfill consumption in the oil market. OPEC and its allies are due to meet on November 26 to review the production policy for the year ahead.

India's crude oil imports

Meanwhile, OPEC also highlighted India's crude imports declined for the fifth month in a row to average 4.6 mb/d in July, as the country moved further into the lower demand monsoon season. Compared to the previous month, crude inflows were down 210 tb/d, or over 4 per cent. year-on-year crude imports declined by 0.3 mb/d, or more than 6 per cent. 

In terms of crude imports by source, Kpler data shows Russia was the top supplier of crude to India in July, with a share of 44 per cent. Iraq was second with 20 per cent, followed by Saudi Arabia with 11 per cent, according to the OPEC monthly report.

Compared with the previous month, India's product imports fell 6 per cent and were down by roughly the same amount in July 2022. As a result, India remained a net product exporter in July at 346 tb/d, which compares to 251 tb/d the month before. In July 2022, India's net exports averaged 113 tb/d.

Looking ahead, India's crude imports are expected to be lower in August, with Russian crude inflows down by about 25 per cent and total crude imports down by about 7 per cent. Product exports are seen increasing, amid higher diesel outflows as the monsoon season curbs domestic demand.