OPEC cuts global oil demand forecast for 2022 due to war in Ukraine

A 3D printed oil pump jack is seen in front of the OPEC logo displayed in this illustration image, April 14, 2020. REUTERS/Dado Ruvic

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  • Cuts 2022 oil demand growth forecast by 480,000 bpd
  • Sees downside risks to economic growth
  • Cuts Russian oil production forecast for 2022 and sees more US shale
  • March OPEC output rises 57,000 bpd, lagging reported hike

LONDON, April 12 (Reuters) – OPEC on Tuesday lowered its forecast for global oil demand growth in 2022, citing the impact of Russia’s invasion of Ukraine, rising inflation with soaring crude prices and the resurgence of the Omicron coronavirus variant in China.

In a monthly report, the Organization of the Petroleum Exporting Countries (OPEC) said global demand would increase by 3.67 million barrels per day (bpd) in 2022, down 480,000 bpd from its previous forecast. .

The February invasion pushed oil prices above $139 a barrel, the highest since 2008, adding to inflationary pressures. Crude has since fallen as the United States and other countries announced plans to tap strategic oil stocks to boost supply, but it remains above $100.

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“While Russia and Ukraine are forecast to face recessions in 2022, the rest of the global economy will also be deeply affected,” OPEC said in the report.

“The sharp rise in commodity prices, combined with persistent supply chain bottlenecks and logistics blockages related to COVID-19 in China and elsewhere, is fueling global inflation.”

Even so, global oil consumption is expected to surpass the 100 million bpd mark in the third quarter, as predicted by OPEC. On an annual basis according to OPEC, the world last used more than 100 million bpd of oil in 2019.

OPEC said inflation was the main factor impacting the global economy and lowered this year’s economic growth forecast to 3.9% from 4.2% and said there was a chance of a further reduction.

“Additional downside risks to this forecast are estimated to be substantial, amounting to more than half a percentage point, especially if the current situation extends into the second half of 2022 or even worsens,” the report said. report.

Oil briefly pared an earlier gain after the report was released, although it rose nearly $5 to top $103 at 1325 GMT.

OUTPUT UNDERRATES

OPEC and its allies, including Russia, in a group known as OPEC+, are reversing record production cuts put in place in 2020 and have pushed back against Western pressure to increase production at a faster rate.

At its last meeting, OPEC+ avoided war in Ukraine, which Russia calls a “special military operation”, and stuck to a previously agreed plan to increase its monthly production target by 432,000. bpd in May. Read more

Underinvestment in oilfields by some OPEC members – partly due to the pandemic – means the group has not been able to fully deliver promised production increases.

The OPEC report showed OPEC output in March rose just 57,000 bpd to 28.56 million bpd, lagging the 253,000 bpd increase OPEC authorized. under the OPEC+ agreement.

The forecast for non-OPEC supply growth in 2022 has been cut from just over 300,000 bpd to 2.7 million bpd. OPEC cut its Russian production forecast by 530,000 bpd, although it raised its forecast for US tight oil, another term for shale.

OPEC expects US tight oil supply to increase to 880,000 bpd in 2022, from 670,000 bpd last month, and said there was potential for further expansion even though most US oil companies still focus on capital discipline.

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Editing by Jason Neely and Barbara Lewis

Our standards: The Thomson Reuters Trust Principles.


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Felix J. Dixon