OPEC sees Russia’s invasion of Ukraine reducing both world oil demand and supply, indicating little need for the group to move away from its current production policy.
It is the latest sign that the cartel will remain on the fringes of the escalating energy crisis. OPEC Secretary-General Mohamed Barkindo told the European Union on Monday that the oil market was beyond its control.
The Organization of the Petroleum Exporting Countries has cut its forecast for global oil consumption by 410,000 barrels per day in 2022, according to its latest monthly report. At the same time, it lowered supply estimates from outside the cartel to 330,000 barrels a day, with Russia’s output now seen at 530,000 barrels a day, below previous estimates.
Several oil refiners are boycotting Russian crude because international sanctions complicate dealings with Moscow, while widespread condemnation over its aggression in Ukraine continues to grow. Demand has also plummeted, especially as China reimposes strict lockdowns to contain the latest spread of the virus.
The resulting neutral picture suggests that OPEC’s de facto leader, Saudi Arabia, will continue to open the tap and reject international calls to fill the gap left by Russia. The state has been keen to maintain ties with Moscow, with which it jointly leads a coalition of producers known as OPEC.
Riyadh’s inaction is leaving crude oil prices close to $100 a barrel, adding inflationary pressures to the world economy, and incurring huge costs to millions of consumers.
Nonetheless, an analysis by OPEC’s Vienna-based research department pointed to a continuation of the status quo.
“Oil-demand growth was moderated to the downside” thanks to “declining global GDP due to geopolitical developments in China and the resurgence of the Omicron variant”, the report said.
The OPEC coalition has instead stuck with a policy of restoring production stalled during the pandemic in modest tranches of about 400,000 barrels a day, though most of its 23 members are struggling to agree an increase. Many, such as Nigeria and Angola, have seen their capacity eroded by low investment and operational disruptions.
Data from OPEC’s latest monthly report showed the group’s troubles remained, with 13 of its members adding only 57,000 barrels a day in March – a fifth of the planned amount.