DTN Oil

WASHINGTON (DTN) -- New York Mercantile Exchange oil futures and Brent crude traded on the Intercontinental Exchange flipped between modest gains and losses early Thursday after the Organization of the Petroleum Exporting Countries estimated in its Monthly Oil Market Report crude production from the 13-member cartel declined by about 280,000 barrels per day (bpd) during the first quarter of the year, led by output losses in Angola, Iraq, and Nigeria.

In March, OPEC's total oil production dropped by an additional 86,000 bpd month-over-month to average 28.90 million bpd, according to secondary sources cited in the report. The decline was realized before OPEC announced a 1.2-million-bpd production cut effective from May 2023 until the end of the year. It's worth noting that the U.S. Energy Information Administration pegged the actual decline in OPEC's targets this year well below the promised cut due to underproduction in the prior months.

"In March, OPEC produced less than its previous targets, and in our March STEO, we had assumed that OPEC production would fall further below the prior production targets in the coming month. Because we had already accounted for some of the reduction in OPEC's crude oil, we have reduced our forecast for OPEC's crude oil production from second to fourth quarter 2023 around 500,000 bpd." said EIA in its monthly report. EIA now expects OPEC oil production to fall by 400,000 bpd this year compared to 2022 levels.

For countries outside of OPEC, the cartel forecasts production would grow by 1.4 million bpd year-on-year to average 67.2 million bpd, broadly unchanged from last month.

U.S. oil production is expected to recover gradually after the considerable drop in December 2022. However, the supply growth forecast for 2023 was revised down slightly to an average of 1 million bpd, citing lower-than-expected drilling and completion activities in the first quarter of 2023.

On the demand side, OPEC left its demand projections unchanged at 2.3 million bpd annualized growth. There are minor downward adjustments, reflecting the recent banking crisis in the OECD region, but stronger-than-expected demand seen in non-OECD countries in January and February necessitated some upward revisions. Oil demand in the OECD is forecast to increase a modest 100,000 bpd this year, while non-OECD demand is forecast to grow by 2.2 million bpd. OPEC left its global economic growth forecast unchanged at 2.6%. For the U.S., the economic growth forecast is unchanged at 1.2% for 2023. Similarly, the Eurozone's economic growth forecast remains at 3.5% for 2022 and 0.8% for 2023.

In broader markets, the U.S. Dollar Index extended losses against the basket of foreign currencies to trade near a two-month low 100.905 after the U.S. Consumer Price Index released Wednesday showed inflation cooled more than expected in March. Headline inflation fell to the lowest level since May 2021, with prices paid for groceries retreating for the first time since September 2020, providing a much-welcomed relief for many American families. Prices for such key food items as eggs, fruits and vegetables declined sharply from the prior month. The broader food category was unchanged at 0% for the first time since November 2020. What's more, prices paid for energy, including gasoline and fuel oil, decreased by more than 4% from the prior month, sending the overall energy index tumbling 6.4% against a year earlier.

However, the core CPI -- which excludes food and energy and is closely watched by the Fed -- still rose 0.4% following a 0.5% gain, reflecting the sticky nature of services inflation. The core CPI was up 5.6% from a year ago. It's the first time in over two years that the core came in above the headline measure, which was up 5%.

Near 7:30 a.m. EDT, West Texas Intermediate futures declined by $0.28 to $82.98 barrel (bbl). The international crude benchmark Brent for June delivery softened $0.32 bbl to $ 86.99 bbl. NYMEX May RBOB futures softened $0.0298 to $2.8429 gallon, and the May ULSD contract traded unchanged near $2.7023 gallon, up $0.0349 gallon.

Liubov Georges can be reached at liubov.georges@dtn.com