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LONDON, March 15 (Reuters) – OPEC said on Tuesday that oil demand in 2022 faces challenges from Russia’s invasion of Ukraine and rising inflation as crude prices rise in arrow, increasing the likelihood of cuts to its robust demand forecast this year.
Oil prices soared above $139 a barrel this month, hitting highs not seen since 2008, as Western sanctions tightened against Moscow over its invasion of Ukraine and disrupted oil sales from Russia , helping to fuel already rising inflation.
In a monthly report, the Organization of the Petroleum Exporting Countries (OPEC) stuck to its view that global oil demand would increase by 4.15 million barrels per day (bpd) in 2022 and increased its global demand forecasts for its crude.
But OPEC, which just a month ago raised the possibility of a faster demand increase in 2022, said the war in Ukraine and lingering concerns over COVID-19 would negatively impact short term on global growth.
“Looking forward, challenges in the global economy – particularly with respect to slowing economic growth, rising inflation and ongoing geopolitical unrest will impact oil demand in various regions. “, OPEC said in the report.
“While the year started on relatively strong underlying fundamentals, the latest events in Eastern Europe could derail the recovery,” OPEC said in its commentary on the global economy.
Global oil consumption is expected to top the 100 million bpd mark in the third quarter, in line with OPEC forecasts last month. OPEC raised its forecast for total oil consumption for the year by about 100,000 bpd to 100.90 million bpd.
On an annual basis, OPEC said the world last used more than 100 million bpd of oil in 2019.
Oil prices extended their earlier decline after the release of the report, trading further below $99 a barrel on the perception of diminishing supply risks.
The report also showed higher output from OPEC as the group and allied non-members, known as OPEC+, phase out record production cuts put in place in 2020.
OPEC+ aims to increase production by 400,000 bpd per month, with about 254,000 bpd due to 10 participating OPEC members, but production has increased less than that as some producers struggle to pump more .
Still, the report showed OPEC production in February bucked that trend and rose 440,000 bpd to 28.47 million bpd, driven by higher supply from the top Saudi exporter and a recovery after blackouts in Libya.
The forecast for non-OPEC aggregate supply growth in 2022 remained unchanged, as did that for U.S. tight oil production, another term for shale.
OPEC said it expects the world to need 29 million bpd from its members in 2022, up 100,000 bpd from last month and theoretically allowing for further production increases.
Editing by Edmund Blair and Barbara Lewis
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