Crude Oil

September 2023 Oil Market Review: Rising Demand, Tightening Supplies, and Surging Prices

Renovo Team
6 Min

In September 2023, the crude oil market witnessed several pivotal developments:

  1. Surge in Oil Prices: At the start of September, oil prices rose to their highest levels in over seven months. This surge ended a two-week losing streak and was primarily fueled by expectations of tightening supplies. The market's reaction suggests a significant concern over the availability of oil in the near future​​.
  2. Growth in World Oil Demand: The global demand for oil was on track to grow by 2.2 million barrels per day (mb/d) in 2023, reaching a total of 101.8 mb/d. This increase was largely driven by a resurgence in Chinese consumption, as well as increased usage in jet fuel and petrochemical feedstocks. The rise in demand from China marks a significant turnaround, considering the country's previous economic slowdowns​​.
  3. Highest Oil Prices of the Year: Mid-September saw oil prices climbing to the highest levels of 2023. This upward trend was attributed to expectations of increasingly tight supply, which seemed to overshadow concerns about weaker economic growth and rising U.S. crude oil production. The market appeared to be more influenced by supply-side factors than by potential dampeners of demand​​.
  4. Expectations of Extended OPEC+ Supply Cuts: Early in the month, oil prices edged higher based on the anticipation that OPEC+ would continue to keep supplies tight. Additionally, there was speculation about the U.S. Federal Reserve possibly ending its aggressive monetary policies, which likely contributed to the market's optimism. The potential extension of supply cuts by OPEC+ members played a crucial role in shaping market expectations​​.
  5. Forecast of Falling Prices in the Coming Years: Despite the current trends, the U.S. Energy Information Administration (EIA) projected that oil prices would decrease in 2023 and 2024. Brent crude oil prices were expected to average around $83 per barrel in 2023 and drop to $78 per barrel in 2024, down from $101 per barrel in 2022. This forecast was based on the anticipation that global oil production would surpass consumption, leading to a more balanced or oversupplied market​​.

These developments in September 2023 highlight the volatile and unpredictable nature of the crude oil market, influenced by a complex interplay of supply and demand dynamics, geopolitical decisions, and macroeconomic factors.