OPEC is stuck with its forecast that world oil demand will exceed pre-pandemic levels in 2022, although the producer group said Russia’s invasion of Ukraine and developments around the coronavirus pandemic pose considerable risks.
Source: Reuters
In a monthly report released on Tuesday, the Organization of the Petroleum Exporting Countries (OPEC) maintained its forecast that world oil demand will grow by 3.36 million barrels per day (bpd) in 2022, extending the recovery from the 2020 recession. Will do
The Ukraine war sent oil briefly above $139 a barrel in March, the highest since 2008, easing inflationary pressures. The COVID-19 lockdown in China, where Beijing’s outbreak has prompted a massive resumption of testing, has curbed demand for oil.
“Looking ahead, current geopolitical developments and the uncertain roll-out of the pandemic towards the end of the second half of the year continue to pose considerable risks to the forecast recovery to pre-pandemic levels,” OPEC said in the report. “
“Inflation pressures are likely to persist and it remains highly uncertain when geopolitical issues can be resolved. Nevertheless, oil demand is expected to remain at healthy levels in the second half of this year.
The report expects world consumption to cross the 100 million bpd mark in the third quarter, in line with earlier estimates, and for the 2022 average to reach 100.29 million bpd in 2019, just above the pre-pandemic rate .
OPEC put this year’s global economic growth forecast at 3.5 percent, saying the downside “remains significant” and the upside potential “very limited”.
Oil extended earlier gains after the release of the report, trading above $123.
Production is Falling
OPEC and its allies, which includes Russia, known as OPEC+, are increasing output in monthly increments in 2020 after record cuts during the worst of the pandemic.
At its last meeting on June 2, OPEC+ pushed for an increase in oil production to offset the Russian deficit.
Nevertheless, OPEC+ is slacking growth due to low investment in oil fields by some OPEC members and, more recently, losses in Russian production as a result of sanctions and buyer avoidance.
The OPEC report showed that trend continued in May, adding that OPEC output fell 176,000 bpd to 28.51 million bpd due to losses in Libya, Nigeria and other countries.
The growth forecast for non-OPEC supplies was lowered from 300,000 bpd to 2.1 million bpd in 2022. OPEC cut its forecast for Russian production by 250,000 bpd and kept its US production growth forecast steady.
OPEC expects tight US oil supplies, another word for shale, to rise by 880,000 bpd in 2022, unchanged from last month, despite higher prices in previous years that have encouraged growth.
