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Global oil demand will drop by 1.4 million barrels per day, according to the latest forecast by Rystad Energy on Friday cited by the National.
The 1.4 million bpd loss would sink oil demand to 99.6 million bpd on average, below 2019 levels of 100.2 million bpd. And a rebound in this demand isn’t expected to happy until next year at the soonest, Rystead said.
The drop in oil demand will likely come from the Russian invasion of Ukraine, soaring inflation, China’s covid-inspired lockdowns, and supply chain disruptions. And even more oil demand pressure could be applied through future lockdowns or geopolitical issues.
“Shrinking demand is a direct result of the impact of lower economic activity globally,” the consultancy said, adding that such a demand decrease could ease today’s tight oil markets, calming oil prices.
Rystad isn’t the only one lowering oil demand forecasts. OPEC cut its 2022 oil demand growth forecast by 480,000 bpd on the back of lower expected global economic growth given the war in Ukraine and China’s covid lockdowns.
The IEA also cut its oil demand forecast by 260,000 bpd to reflect the return of severe covid lockdowns in China.
Meanwhile, the World Bank and the IMF have both cut their overall global growth expectations for this year.
But Rystad isn’t changing its outlook for bullish oil prices. According to Rystad, if the Russian war in Ukraine drags on, it will increase oil and gas prices, particularly if the EU ends up banning oil and gas this year.
“The Russian war worst case for oil demand is premised on Brent prices reaching $180 per barrel in the fourth quarter, triggering a further economic slowdown and outright destruction of oil demand,” Rystad said.
By Julianne Geiger for Oilprice.com
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Julianne Geiger is a veteran editor, writer and researcher for Oilprice.com, and a member of the Creative Professionals Networking Group.