OPEC: inflation and war in Ukraine could slow oil demand growth

OPEC left its view on oil demand growth unchanged on Tuesday, but warned that Russia’s war in Ukraine and spiraling inflation could impact oil consumption growth this year. , which “remains under evaluation”.

In his close supervision Oil Market Monthly Report Today, OPEC left its outlook for global oil demand growth at 4.2 million barrels per day (bpd), “for now”, but flagged “extreme uncertainty surrounding macroeconomic performance world”.

“However, these forecasts are subject to change in the coming weeks when there is more clarity on the far-reaching impact of geopolitical unrest,” OPEC said.

The cartel still expects global oil demand to average above pre-pandemic levels this year, and even raised the full-year oil demand estimate to 100.9 million bpd, from 100.8 million bpd in last month’s report, with fourth quarter 2022 demand rising to 103.24 million bpd. 102.92 million bpd expected in February.

Despite the slightly higher estimate for global oil demand, OPEC stressed throughout its report that “it is clear that uncertainty will dominate in the remaining months of 2022.”

“Given this unprecedented level of uncertainty, the forecast for total global oil demand growth for 2022 also remains under estimate at 4.2 mb/d, until more clarity prevails,” said the cartel.

The war in Ukraine has caused a number of problems, including rising commodity prices, which is further accelerating global inflation, and disruption of trade flows and transport logistics, which partly offset the gradual easing global supply chain bottlenecks, says OPEC.

“Thus, the effects of the conflict and especially the impact of rising inflation, if sustained, will lead to lower consumption and investment to varying degrees,” OPEC warned.

In terms of production, OPEC raised its February crude oil output by 440,000 bpd to 28.473 million bpd, led by a 141,000 bpd increase from top producer Saudi Arabia. The second biggest increase, however, came at 105,000 bpd from Libya, which is exempt from the OPEC+ deal.

By Tsvetana Paraskova for Oilprice.com

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Felix J. Dixon