Slowing global economic growth, China’s fight against COVID and Russia’s invasion of Ukraine prompted OPEC to cut its 2022 global oil demand growth estimate for a second month.
In his Oil Market Monthly Report (MOMR) On Thursday, OPEC lowered its forecast for global economic growth and said oil demand would grow 310,000 barrels per day (bpd) less than growth projected in the April report.
In April, OPEC cut its estimate of oil demand growth for 2022 by 480,000 bpd due to lower expected global economic growth with Russia’s war in Ukraine and the return of COVID lockdowns in China.
In this month’s report, the cartel cut its estimate for global economic growth to 3.5% from 3.9%, after revising its forecast for global growth in April to 3.9% from 4.2%.
Commenting on the global economy, OPEC said that “upside potential from current forecasts is quite limited. However, this may come from a solution to the situation in Russia and Ukraine, from fiscal stimulus, if possible, and from a waning pandemic, in combination with a sharp increase in the activity of the sector. services.
For global oil demand, OPEC now expects growth of 3.36 million bpd in 2022 from 2021, down 310,000 bpd from last month’s estimate. Yet overall, global oil demand is still expected to average over 100 million bpd this year, at 100.29 million bpd, according to OPEC’s latest forecast. The second quarter demand estimate was revised down by 670,000 bpd to 98.44 million bpd, but average global oil demand is expected to exceed the 100 million bpd mark in the third and fourth quarters, the fourth quarter demand being 102.64 million bpd.
“Demand in 2022 is expected to be affected by ongoing geopolitical developments in Eastern Europe, as well as restrictions related to the COVID-19 pandemic,” OPEC said.
“Uncertainties over the outlook remain significant, particularly given recent geopolitical developments in Eastern Europe. Additionally, high inflation levels, coupled with labor shortages and tighter monetary policies from major central banks, can also impact the cost of oil production and upstream investment levels beyond the short term,” the cartel noted.
Also on Thursday, the International Energy Agency (IEA) released its monthly reportin which it left its demand forecast unchanged from last month, expecting oil demand in 2022 to grow by 1.8 million bpd on average to 99.4 million bpd.
Despite the loss of supply from Russia, “steadily increasing production elsewhere, coupled with slower demand growth, particularly in China, should help head off an acute short-term supply shortfall,” the IEA said in its report.
By Tsvetana Paraskova for Oilprice.com
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