- Morgan Stanley has raised its global oil demand forecast for 2023 by 36%, an increase of 1.9 million barrels per day.
- China’s economic rebound and increasing demand for air travel were cited as the two main reasons for the update.
- The bank also noted that supply from Russia has been stronger than expected, leading it to lower its oil price predictions for the second half of the year.
Morgan Stanley has raised its forecast for global oil demand for this year by 36%, citing China’s economic reboot and higher demand for air travel.
The investment bank now expects oil demand this year to rise by 1.9 million bpd, up from an earlier forecast of demand growth amounting to 1.4 million bpd, Reuters reported, citing a note by Morgan Stanley analysts.
“Mobility indicators for China, such as congestion, have been rising steadily,” the note said, adding that “flight schedules have firmed-up the outlook for jet fuel demand.”
This may not lead to a substantial deficit in global oil markets, however, because the bank expects Russian supply to offset some of that demand.
Even so, oil markets are about to swing into a shortage in the second half of the year, pushing Brent crude prices to between $90 and $100 per barrel. This is a downward revision on earlier price forecasts by the bank’s analysts, who expected Brent to hit $100 to $110 per barrel in the second half of the year.
“We previously estimated a ~1 mb/d year-on-year decline in 2023, which we moderate to 0.4 mb/d,” they said about Russian oil production.
Russia said earlier this month it would cut oil production by half a million barrels from January levels in March in response to Western price caps, according to Deputy Prime Minister Alexander Novak.
Meanwhile, Goldman Sachs forecast that Brent crude may not hit $100 until the end of the year, revising earlier expectations of this happening a lot sooner, about mid-2023. The reasons for the revision that the bank’s analysts cited were higher production in Russia and the United States that could push the market into a moderate surplus this year.
