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Tsvetana Paraskova

Tsvetana Paraskova

Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. 

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The Oil Market Isn’t Buying The Bullish Demand Forecasts

  • Traders, this week, focused on rising U.S. crude oil inventories, record American oil production, weaker Chinese refinery and economic data.
  • The bullish demand outlook from OPEC and the IEA was quickly forgotten by the markets.
  • ING's Patterson and Manthey: The price weakness we are seeing means that it is increasingly likely that the Saudis will roll over their additional voluntary cut of 1MMbbls/d into early next year.
Oil trader

This week, both OPEC and the International Energy Agency (IEA) revised their oil demand forecasts higher, citing record Chinese consumption and resilient economies.  

Oil market participants, however, focused on rising U.S. crude oil inventories, record American oil production, weaker Chinese refinery and economic data, and the first drop in U.S. retail sales in seven months, as negative sentiment persisted and dragged down oil prices to a four-month low. 

The WTI slide below $75 per barrel and the move down in Brent to well below $80 a barrel intensified speculation among analysts that Saudi Arabia could roll over its extra voluntary cut of 1 million barrels per day (bpd) into early next year. 

The Saudis and OPEC see the negative sentiment as “exaggerated” and the current concerns about the economy as “overblown.” 

OPEC dismissed the negative market sentiment as overblown and said that the oil market fundamentals remain strong, with Chinese crude imports set to increase to a new annual record in 2023.

A few days earlier, the energy minister of OPEC’s top producer and the world’s largest crude oil exporter, Saudi Arabia, said that oil demand continues to be robust and blamed speculators for the drop in oil prices.

The IEA said in its monthly report this week that global oil consumption continued to be strong in September, with a record-high Chinese demand of 17.1 million bpd.  Related: ExxonMobil vs. Google: Profits and Perceptions Explained

Due to an all-time high Chinese monthly demand and resilient consumption in the United States, the agency revised up its 2023 oil demand growth forecast to 2.4 million bpd, up from 2.3 million bpd growth expected in the October report. 

This year, China is expected to account for 1.8 million bpd of the 2.4 million bpd growth, which will lift total global demand to 102 million bpd, according to the IEA’s estimates.  

But data on actual crude oil imports in China and the rest of Asia so far this year have shown that demand may be weaker than the IEA’s bullish forecasts, Reuters columnist Clyde Russell notes

Demand growth in China is likely to be closer to the OPEC estimate of 1.14 million bpd this year, according to Russell’s estimates. 

Concerns about Chinese demand and the U.S. economy have been dragging oil prices down since October, following a jump in the late summer after Saudi Arabia began its voluntary cut.  

This week, Chinese data showed refinery runs slowed in October from a record-high crude throughput in September, as refining margins weakened and some independent refiners ran out of crude import quotas. 

The property sector in China continues to be of concern as it is holding back a true economic recovery. 

The first U.S. retail sales dip since March added to concerns about consumer spending and economies, further weighing on market sentiment.

In addition, oil supply from non-OPEC+ producers, led by the U.S., is higher than forecast, suggesting a market surplus early next year and making a stronger case for rollover of the Saudi and Russian cuts into 2024.  

“There are clearly concerns around demand going into next year, particularly around China, which OPEC this week sought to relieve, to no avail,” Craig Erlam, senior market analyst at OANDA, said on Thursday after oil prices dipped by 5% in one day.   

“The recent trend may make it difficult for Saudi Arabia and Russia to allow their unilateral cuts to expire at the end of the year, which is something markets may be gradually pricing in,” Erlam added. 


“The lack of a commitment to extend so far may reflect a desire to not but as we’ve seen so often in the past, the producers will do whatever it takes to support the price.” 

According to Ole Hansen, Head of Commodity Strategy at Saxo Bank, the short-term risk of additional weakness in oil prices “cannot be ruled out given continued selling pressure from momentum-focused funds, but traders may also consider the risk of additional action to support prices from OPEC and non-OPEC when they meet on November 26.” 

ING strategists Warren Patterson and Ewa Manthey wrote in a Friday note that “The price weakness we are seeing means that it is increasingly likely that the Saudis will roll over their additional voluntary cut of 1MMbbls/d into early next year. Doing this should help erase the expected surplus and provide some support to the market.” 

By Tsvetana Paraskova for Oilprice.com

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Leave a comment
  • Mike Lewicki on November 18 2023 said:
    just wait.

    outages, wars, production issues....

    75 wti is OK for this time of year.

    what will you do if opec does an across the system maintenance program in January 2024 and rids all inventory that they have and global inventories fall another 5%....

    what do they say "careful what you wish for"
  • George Doolittle on November 19 2023 said:
    As prices plunge clearly no pressure to increase output just as Venezuela...or Canada. If the USA suddenly switches over to methane for rocket fuel that's great news for the US Airline Industry which definitely needs some great news right now such as the Airbus A220. I think his name his David Neelan has a brand new Airline running nearly wholly only on Airbus A220 so interesting search in that regard. Crazy strong Year for tourism for the State of Florida en route so safe travels of enormous import for the oil industry complex that that play out. Long $kmi Kinder Morgan Energy strong buy
  • Mamdouh Salameh on November 19 2023 said:
    OPEC is the most reliable forecaster as its forecasts have been proven right time and time again.

    Efforts by speculators and oil traders abetted by the IEA to cast doubt on the strength of global oil demand and depress oil prices are bound to fail.

    How could they explain the record-breaking Chinese crude imports and the fact that China’s domestic demand is expected to hit 17:10
    Million barrels a day (mbd) this year, the highest figure in China’s oil history? Also how could they explain tightness of the oil market?

    Dr Mamdouh G Salameh
    International Oil Economist
    Global Energy Expert


Leave a comment

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