OPEC Says High Prices Will Dampen Pace of Recovery in Oil Demand | Investment News

LONDON (Reuters) – OPEC on Thursday cut its forecast for global oil demand for the final quarter of 2021 as high energy prices dampen the recovery from COVID-19, delaying the timetable for a return to levels of oil use from before the pandemic until later in 2022 .

The Organization of the Petroleum Exporting Countries in a monthly report also raised its supply forecast for U.S. shale producers next year, a potential headwind to efforts by the group and its allies, known as OPEC+. , to balance the market.

OPEC said it expects oil demand to average 99.49 million barrels per day (bpd) in the fourth quarter of 2021, down 330,000 bpd from last month’s forecast. . The demand growth forecast for the year was cut from 160,000 bpd to 5.65 million bpd.

“A slower pace of recovery in the fourth quarter of 2021 is now assumed due to high energy prices,” OPEC said in the report. OPEC also cited slower-than-expected demand in China and India for the downgrade.

Oil hit a three-year high above $86 a barrel this year as OPEC+ only gradually increases supply and demand rises, sending pump prices to their highest in years in some markets. Prices for natural gas, electricity and coal also soared.

Governments, businesses and traders are watching closely how quickly demand recovers. A slower pace could ease upward pressure on prices and reinforce the idea that the impact of the pandemic will dampen demand for good.

OPEC now sees global consumption surpassing the 100 million bpd mark in the third quarter of 2022, three months later than forecast last month. On an annual basis according to OPEC, the world last used more than 100 million bpd of oil in 2019.

The producer group stuck to its forecast that demand will increase by 4.15 million bpd next year. This will bring consumption to an average of 100.6 million bpd, above the 2019 level.

Oil was little changed just below $83 a barrel after the report was released, up from an earlier decline.

The report also showed higher OPEC production and projected increased supplies from U.S. shale producers in 2022.

OPEC+ is phasing out the record production cuts put in place last year. In July, the group pledged to gradually increase production by 400,000 bpd per month starting in August.

The report shows OPEC production rose in October by 220,000 bpd to 27.45 million bpd, with top Saudi producer providing half of the increase. Four of OPEC’s 13 members pumped less due to a lack of capacity.

OPEC sees production of U.S. tight oil, another term for shale, increase by 610,000 bpd in 2022, up 200,000 bpd from last month’s forecast, after contracting this year as rising oil price encourages more investment.

Still, OPEC left its growth forecast for non-OPEC global supply in 2022 stable due to downward revisions at other producers.

With a drop in demand now seen, OPEC expects the world to need 28.7 million bpd from its members in 2022, down 100,000 bpd from last month, but still allowing higher OPEC production.

(Reporting by Alex Lawler; Editing by Jan Harvey, Elaine Hardcastle)

Copyright 2021 Thomson Reuters.

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Felix J. Dixon