Providing coverage of Alaska and northern Canada's oil and gas industry
November 2022

Vol. 27, No.45 Week of November 06, 2022

OPEC: Demand to grow

Bullish OPEC; robust US crude draws; falling dollar quell demand fears

Steve Sutherlin

Petroleum News

Alaska North Slope crude leapt $1.77 higher Nov. 2 to close at $96.11 per barrel, while West Texas Intermediate jumped $1.63 to close at $90 and Brent picked up $1.51 to close at $96.16.

The price advances come in the wake of a revised outlook by the Organization of the Petroleum Exporting Countries released Oct. 31 that raised estimates of global oil demand in the medium and long term.

Prices were further supported by U.S. Energy Information Administration data released Nov. 2 showing a significant drawdown of U.S. oil reserves.

ANS rose Nov. 1, adding $1.36 to close at $94.35. WTI leapt $1.84 to close at $88.37 but Brent edged 18 cents lower to close at $94.65.

The U.S. dollar fell against other currencies Nov. 1, which added strength to oil prices.

Prices were also boosted by a Twitter entry late Oct. 31 by noted Chinese economist Hao Hong that said a “reopening committee” formed and led by Politburo Standing Member Wang Huning was reviewing COVID data from the United States, Hong Kong and Singapore to assess various reopening scenarios, targeting a March 2023 reopen.

Prior to that tweet, oil markets had been spooked lower by demand fears due to strict COVID-19 lockdowns in China which led to lower factory outputs in October.

ANS dropped $1.28 Oct. 31 to close at $92.99, WTI slid $1.37 to close at $86.53 and Brent fell 94 cents to close at $94.83.

On Oct. 28, ANS shed $1.04 to close at $94.27, WTI dropped $1.18 to close at $87.90 and Brent fell $1.19 to close at $95.77.

From Wednesday to Wednesday, ANS notched a 74-cent gain, taking it from an Oct. 27 close of $95.37 to $96.11 on Nov. 2.

OPEC grows bullish for future

To meet future energy demand, the world will need to annually add an average 2.7 million barrels of oil equivalent per day in the period to 2045, OPEC said in its 2022 World Oil Outlook released Oct. 31.

Oil demand is anticipated to increase from 88.3 million boepd in 2021 to 100.6 million boepd in 2045, with oil’s share in the energy mix dropping from 31% to just below 29%, OPEC said, adding, “Despite decelerating oil demand growth, oil is set to retain the highest share in the global energy mix during the entire period.”

Despite short-term market distortions, OPEC projects natural gas demand to increase by 19 million boepd to 2045, supported by demand in all sectors and displacing coal and traditional biomass use. By 2030, gas is projected to overtake coal and become the second largest fuel in the energy mix.

Coal is the only primary fuel expected to log a demand drop in the outlook period, declining from 75 million boepd in 2021 to 58.2 million boepd in 2045.

“Energy intensity is expected to drop in all regions, thanks to increasing energy efficiency in final usage and transformation, as well as the rising share of renewables,” OPEC said. “The largest improvements are expected in China and India.”

OPEC said the share of fossil fuels has remained stable at above 80% for more than 30 years, and the share of oil and gas in the mix has also been stable, hovering near 55%. It said the share of fossil fuels in the mix remained stable despite strong renewables growth in some countries - especially wind and solar - amid strong policy support and declining costs.

The ability of countries to implement adoption of net-zero and/or carbon neutrality targets for 2050 or beyond remains highly uncertain, especially given some recent backtracking because of current geopolitical tensions and energy market crisis, OPEC said.

The world economy is expected to more than double in size, and the global population rise by 1.6 billion between now and 2045, OPEC said.

Global primary energy demand is forecast to continue growing in the medium- and long-term, increasing by a significant 23% in the period to 2045, it said.

“The WOO 2022 once again underscores the increasingly complex nature of the global oil and energy industries,” OPEC Secretary General Haitham Al Ghais said at the launch of the publication at the Abu Dhabi International Petroleum Exhibition and Conference.

“It is a challenging environment, and one that requires expert analysis to help us navigate both the challenges and opportunities ahead,” he said.

US oil drawdown robust

For the week ending Oct. 28, U.S. commercial crude oil inventories - excluding the Strategic Petroleum Reserve - shed 3.1 million barrels from the previous week to 436.8 million barrels, 3% below the five-year average for the time of year, according to data released by the EIA Nov. 2.

Crude oil in the SPR fell 1.9 million barrels to 399.8 million, from 401.7 million barrels Oct. 21. The SPR held 612.5 million barrels Oct. 29, 2021.

Total motor gasoline inventories for the period decreased by 1.3 million barrels, 6% below the five-year average for the time of year, the EIA said.

The American Petroleum Institute said Nov. 1 that U.S. commercial crude inventories have grown by roughly 25 million barrels so far this year, according to its data, while SPR levels fell 194 million barrels - more than seven times as much as commercial inventories had increased.

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