U.S. expects tightening global oil market, reverses production forecast

(Bloomberg) – The U.S. expects the global oil market to tighten this year as it reverses its forecast in a move that more closely aligns with bullish estimates by OPEC and the International Energy Agency.

A small drop in production growth from the Organization of Petroleum Exporting Countries alliance, as well as those outside of them, will trim global supply to 101.1 MMbpd, just short of demand, according to July’s monthly report from the U.S. Energy Information Administration.

At the same time, China’s stimulus plan aimed at accelerating the country’s lagging economic recovery will boost oil consumption a tad more than previously thought.

This supply deficit will see global oil inventories transition from builds in the first half of 2023 to draws through 2024, putting upward pressure on prices, according to the report.

The U.S. is set to produce less oil than previously expected while its demand is seen stable, with higher gasoline and jet fuel use offsetting a decline in diesel.