OPEC cut its forecast for world oil demand growth in 2022, citing the impact of Russia’s invasion of Ukraine, rising inflation as crude oil prices rise, and a resurgence of the Omicron coronavirus variant in China .
OPEC on Tuesday cut its forecast for world oil demand growth in 2022, citing the impact of Russia’s invasion of Ukraine, rising inflation as crude oil prices rise and the resurgence of the Omicron coronavirus variant in China.
In a monthly report, the Organization of the Petroleum Exporting Countries (OPEC) said world demand will grow by 3.67 million barrels per day (bpd) in 2022, down 480,000 bpd from its previous forecast.
The invasion in February sent oil prices above $139 a barrel, the highest since 2008, worsening inflationary pressures. Crude has fallen since the United States and other countries announced plans to tap strategic oil stocks to boost supplies, but remains above $100.
“While it is projected that both Russia and Ukraine will face recession in 2022, the rest of the global economy will be completely affected,” OPEC said in the report.
“The strong rise in commodity prices in combination with ongoing supply-chain constraints in China and elsewhere and the logistical logjam related to COVID-19 is driving all-around global inflation.”
Nevertheless, OPEC has predicted that world oil consumption is expected to cross the 100 million bpd mark in the third quarter. On an annual basis, the world last used more than 100 million bpd of oil in 2019, according to OPEC.
OPEC said inflation was a major factor affecting the world economy and cut this year’s economic growth forecast to 3.9% from 4.2% and said further cuts are likely.
“The risk of further deterioration in this forecast is projected to be high enough to stand at more than half a percentage point, particularly if the current situation extends to the second half of 2022 or worsens,” the report said. is,” the report said.
Oil narrowed its gains shortly after the report was released, although it was up nearly $5 at $103 by 1325 GMT.
output undershoot
OPEC and its allies, including Russia, in the grouping known as OPEC+, are making record production cuts in 2020 and defying Western pressure to ramp up production at a faster pace.
At its last meeting, OPEC+ reversed the Ukraine war, which Russia refers to as a “special military operation”, and stuck to a previously agreed plan to increase its monthly production target to 432,000 bpd in May. .
Low investment in oil fields in some OPEC members – partly a result of the pandemic – has meant the group has been unable to fully meet its promised output growth.
The OPEC report shows OPEC output rose just 57,000 bpd to 28.56 million bpd in March, lagging the 253,000 bpd increase allowed to OPEC under the OPEC+ deal.
The growth forecast for non-OPEC supplies was cut to 2.7 million bpd in 2022 from just 300,000 bpd. OPEC cut its forecast for Russian production by 530,000 bpd, though it raised its forecast for US tight oil, another word for shale.
OPEC expects tight US oil supplies to rise by 880,000 bpd in 2022, up from 670,000 bpd last month, and said further expansion is likely, although most US oil companies are still focused on capital discipline .
(Editing by Jason Neely and Barbara Lewis)
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