WTI crude oil prices have surpassed their peak for the year. reaching USD 83.5 per barrel. This appears to be primarily the result of a lesser pace of global economic slowdown than previously anticipated. This may be confirmed by the new OPEC report, which presents crude demand and production forecasts based on multi-year contracts and new orders. Let's take a look at the data in this report and consider what impact this may have on the oil price and global markets.
Oil shortages by the end of 2024?
Looking at production forecasts, we note that in the absence of a change in production volumes by OPEC from Q3 this year to the end of 2024, there is a possibility of continued shortages. This, in turn, would potentially have an impact on the continuation of price increases. We could already see the first shortfall in Q2 this year. It is important to emphasise that oil products exhibit a low elasticity of demand, which means that an increase in the price of crude does not necessarily result in a decrease in demand for it. For this reason, oil prices on the markets are prone to significant fluctuations.
Source: OPEC
Source: Conotoxia MT5, XTIUSD, Daily
Global economic recovery expected?
The main factor for potential shortages is an increase in expectations of future demand for the coming quarters. We can note that OPEC analysts are already forecasting a recovery. It is noteworthy that the only region where demand is forecast to decline in 2023 is Europe (with an expected decline of 0.6% year-on-year). Interestingly, analysts are forecasting a slowdown in Western countries despite a recovery in the rest of the world. For example: oil demand in the United States is expected to grow by 0.5% and 0.7% in 2023 and 2024, respectively. During the same periods, demand in China could grow by 6.2% and 3.7%, respectively. Due to the link between economic development and the consumption of petroleum products, analysts foresee a clear disparity in development between the East and West of the world. This, in turn, is likely to have a favourable impact on Chinese indices, including the Hang Seng 50 (HK50) index listed on the Hong Kong Stock Exchange.
Source: Dane OPEC
Source: Conotoxia MT5, HK50, Daily
Grzegorz Dróżdż, CAI MPW, Market Analyst of Conotoxia Ltd. (Conotoxia investment service)
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