OPEC on Wednesday cut its forecast for 2022 global oil demand growth for the fourth time since April, and also slashed next year’s figure, citing slowing economies, the resurgence of China’s COVID-19 containment measures and the high Inflation.
Oil demand will rise by 2.64 million barrels per day (bpd), or 2.7 percent, in 2022, the Organization of the Petroleum Exporting Countries (OPEC) said in a monthly report, down 460,000 bpd from the previous forecast.
“The global economy has entered a period of heightened uncertainty and growing challenges amid persistently high inflation rates, monetary tightening by major central banks, high levels of public debt in many regions, and ongoing supply concerns,” OPEC said in the report.
The lower demand outlook gives additional context to last week’s move by OPEC and its allies, known as OPEC+, to make their biggest production cut since 2020 to prop up the market. The US criticized the decision. However, the US Department of Energy also lowered its expectations for global production and consumption in 2023 on Wednesday.
Even after the downgrade, OPEC expects stronger growth in demand this year and next, compared to the International Energy Agency, which published its latest forecasts on Thursday.
Over the next year, OPEC oil demand rose 2.34 million bpd, 360,000 bpd less than previously forecast, to 102.02 million bpd. OPEC continued to expect demand in 2023 to exceed the 2019 pre-pandemic rate.
In contrast, the US Department of Energy saw demand grow 1.5 percent in 2023 to 101.03 million barrels per day, compared to last month’s forecast of 101.50 million barrels per day. It was also expected to increase production by just 0.8 percent to 100.73 million bpd next year.
OPEC cut its forecast for 2022 global economic growth to 2.7 percent from 3.1 percent, lowering the figure for next year to 2.5 percent and saying there was potential for further weakness.
“There are still major downside risks,” OPEC said, adding that there is limited upside from factors such as fiscal measures in the European Union and China and a resolution to the Ukraine war.
Oil prices, which have softened in response to economic worries, ended lower, trading below $93 a barrel.
increase in supply
OPEC+ has ramped up oil production for most of this year in a bid to reverse record cuts introduced in 2020 after the pandemic sapped demand.
The group’s decision for September 2022 saw an increase in its production target by 100,000 bpd, of which about 64,000 bpd would come from the 10 participating OPEC countries.
The report showed that OPEC production rose 146,000 bpd to 29.77 million bpd in September, led by Saudi Arabia and Nigeria.
Nevertheless, OPEC has funded far less than required by the OPEC+ agreement, as some members invest too little in oil fields.
OPEC expected global demand for its crude to average 29.4 million barrels per day next year, down 300,000 barrels per day from last month and implying a surplus of 370,000 barrels per day should the Production will continue at the September rate and other things remain the same.
Still, the OPEC+ production cut agreed last week will apply to all of 2023 and was much larger at two million bpd.
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