© Reuters. FILE PHOTO: A view shows the Kozmino crude oil terminal on the shore of Nakhodka Bay near the port city of Nakhodka, Russia August 12, 2022. REUTERS/Tatiana Meel/File Photo
By Alex Lawler
LONDON (Reuters) – OPEC on Wednesday cut its forecast for global oil demand growth for 2022 for the fourth time since April and also cut next year’s figure, citing slowing economies, resurgence in China’s COVID-19 containment measures and high inflation.
Oil demand will increase by 2.64 million barrels per day (bpd) or 2.7% in 2022, the Organization of the Petroleum Exporting Countries (OPEC) said in a monthly report, down 460,000 bpd from compared to previous forecasts.
The outlook for weaker demand gives additional context to last week’s decision by OPEC and its allies, known as OPEC+, to make their biggest production cut since 2020 to support the market. The United States criticized the decision.
“The global economy has entered a period of heightened uncertainty and growing challenges, amid high levels of inflation, monetary tightening by major central banks, high levels of sovereign debt in many regions as well as persistent supply issues,” OPEC said in the report.
Next year, OPEC expects oil demand to rise by 2.34 million bpd, 360,000 bpd less than expected, to 102.02 million bpd. OPEC still expects demand in 2023 to exceed the pre-pandemic rate of 2019.
OPEC cut its 2022 global economic growth forecast to 2.7% from 3.1%, cut next year’s figure to 2.5% and said there was potential for weakness additional.
“Major downside risks still exist,” OPEC said, adding that there was limited upside potential from factors such as fiscal measures in the EU and China, and any resolution of the war in Ukraine.
For most of this year, OPEC+ has increased oil production to undo record cuts put in place in 2020 after the pandemic reduced demand.
Their decision for September 2022 called for a 100,000 bpd increase in the group’s production target, of which about 64,000 bpd was to come from the 10 participating OPEC countries.
The report shows OPEC production rose 146,000 bpd to 29.77 million bpd in September, led by Saudi Arabia and Nigeria.
Yet OPEC is pumping far less than the OPEC+ deal provides due to underinvestment in oilfields by some members.