Oil Price Up to 90 Euros per Barrel by the End of 2023

In this week’s report, OPEC points to optimistic forecasts for oil demand, dismissing doubts and pessimism from market participants, writes chief economist of HUP Hrvoje Stojić in the Weekly Focus.

According to him, OPEC expects global oil demand to increase by 4.5 million barrels per day in 2023, followed by a slower but solid growth of 2.25 million barrels in 2024. According to OPEC’s forecasts, the oil market remains undersupplied and should strengthen supply channels to increase current output by about three million barrels per day.

Assuming that OPEC’s production remains unchanged in the first quarter of 2024, the supply shortfall would increase by more than two million barrels per day in the second half of next year. Saudi Arabia, writes Stojić, is not particularly inclined to OPEC’s forecasts as this country would find it difficult to maintain the current output reduction in the long term.

However, it seems that Saudi Arabia trusts the forecasts of the International Energy Agency more, as they present a pessimistic outlook for oil demand in the coming year in their monthly report, leaving no room for further reductions in Saudi production.

Meanwhile, Iraqi Oil Minister Hayan Abdel-Ghani expects the acceptance of an agreement with the KRG (Kurdish Regional Government) and foreign oil companies within three days to continue oil production in the Kurdish region.

Iraq, he claims, has found understanding from Turkey regarding the continuation of exports of this raw material. After the arbitration ruling of the International Chamber of Commerce (ICC) in March this year, Turkey halted the export of 450 thousand barrels of oil per day from northern Iraq via pipeline to the Turkish Mediterranean port of Ceyhan.

This continuation of transport could add pressure on oil prices if Iraq does not reduce oil exports in the southern regions to stabilize supply. Iraq, together with OPEC+, agreed to reduce oil production, but still produced slightly more than agreed in October this year, as reported in the monthly report by OPEC+.

Therefore, further increases in supply would severely violate the OPEC+ agreement, so it is expected that Iraq will take a step back. In the last quarter of this year, the price of Brent is expected to be around 89 dollars per barrel, with a decline to 85 dollars in the last quarter of 2024, concludes Stojić.