OPEC Cuts 2022, 2023 Oil Demand Growth Forecasts Amid Slowing Economy

OPEC Cuts 2022, 2023 Oil Demand Growth Forecasts Amid Slowing Economy

For the fourth time since April, OPEC reduced its projection for the rise in global oil demand in 2022 and lowered its estimate for the following year, citing weakening economies, the revival of China’s COVID-19 containment measures, and high inflation, Reuters reported.

OPEC projects that oil demand would increase by 2.64 million barrels per day (mmbbl/d), or 2.7%, in 2022, which is a decrease of 460,000 bbl/d from the previous forecast.

“The world economy has entered into a time of heightened uncertainty and rising challenges, amid ongoing high inflation levels, monetary tightening by major central banks, high sovereign debt levels in many regions as well as ongoing supply issues,” OPEC said in the report.

The prediction for decreased demand provides additional background for last week’s decision by OPEC and its partners, collectively known as OPEC+, to reduce supply to its lowest level since 2020 in order to stabilize the market. The choice was condemned by the US. The U.S. Energy Department, however, also reduced its projections for world production and consumption in 2023.

OPEC continues to anticipate faster demand growth this year and next than the International Energy Agency.

According to OPEC, oil demand will increase by 2.34 mmbbl/d to 102.02 mmbbl/d next year, which is 360,000 bbl/d less than anticipated. The demand is still anticipated by OPEC to surpass the pre-pandemic pace of 2019 in 2023.

In contrast, the U.S. Energy Department projects a 1.5% increase in demand to 101.03 mmbbl/d in 2023, down from the previous month’s prediction of 101.50 mmbbl/d. It also predicts that production would only rise by 0.8% to 100.73 mmbbl/din 2019.

The Organization of the Petroleum Exporting Countries (OPEC) lowered its projection for global economic growth in 2022 from 3.1% to 2.7% and indicated there was a chance for more weakening.

“Major downside risks still exist,” OPEC said, adding there was a limited upside potential from such factors as fiscal measures in the European Union and China, and any resolution to the Ukraine war.

In reaction to concerns about the economy, oil prices have been declining. They closed lower, trading below $93 per barrel.

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