OPEC says Russian-Ukrainian war could sap oil demand, puts forecast ‘undervalued’

The Organization of the Petroleum Exporting Countries said on Tuesday it was leaving its economic forecast and estimate of crude oil demand and supply growth in 2022 “undervalued”, warning that inflation fueled by the Russian-Ukrainian war could reduce oil consumption.

In its monthly report, the cartel said the conflict in Eastern Europe adds further downside risk to the global economic outlook in 2022. In addition to issues related to the COVID-19 pandemic, including rising commodity prices raw materials, the war in Ukraine contributes to the rise in global inflation. .

“The effects of the conflict, particularly the impact of rising inflation, if sustained, will lower consumption and investment to varying degrees,” the report said.

Citing these concerns and the “extremely high uncertainty” surrounding global macroeconomic performance, “global oil demand growth forecast for 2022 remains undervalued at 4.2 [million barrels a day], OPEC said. Demand growth for member countries of the Organization for Economic Co-operation and Development, a club of majority wealthy nations, is 1.9 mb/d, with growth for non-OECD countries of 2. 3 mb/d.

The forecast, however, is subject to change in the coming weeks when there is more clarity on the far-reaching impact of the geopolitical crisis, OPEC said.

The estimate of demand growth in 2021 has been increased by 50,000 barrels per day.

The non-OPEC supply outlook in 2022 remained at 3mb/d, year-over-year, but is also being assessed, OPEC said, and will be reviewed and adjusted in the weeks to come. come if necessary.

The main drivers of liquids supply growth are expected to be the United States and Russia, followed by Canada, Brazil, Kazakhstan, Guyana and Norway, according to the report.

Oil futures remained lower on Tuesday, after falling sharply ahead of the report. CL.1 crude West Texas Intermediate,
the U.S. benchmark, was down 7% at $95.89 a barrel on the New York Mercantile Exchange after hitting a 14-year high above $130 a barrel last week.

Crude Brent BRN00,
the global benchmark, was down 6.5% at $99.99 a barrel.

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Felix J. Dixon