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Tsvetana Paraskova

Tsvetana Paraskova

Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. 

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OPEC Cuts Global Oil Demand Growth Forecast, Again

  • OPEC cuts world economic growth estimate to 3.5% from 3.9% last month.
  • OPEC now sees growth of 3.36 million bpd in 2022 compared to 2021.
  • OPEC: Demand in 2022 is expected to be impacted by ongoing geopolitical developments in Eastern Europe, as well as COVID-19 pandemic restrictions.

Slower global economic growth, China’s fight against COVID, and the Russian invasion of Ukraine prompted OPEC to slash for a second month running its global oil demand growth estimate for 2022.

In its Monthly Oil Market Report (MOMR) out on Thursday, OPEC revised down—again—its forecast for global economic growth and said oil demand would grow by 310,000 barrels per day (bpd) less than the growth anticipated in the April report.

Back in April, OPEC slashed its oil demand growth estimate for 2022 by 480,000 bpd on the back of lower expected global economic growth with the Russian war in Ukraine and the return of COVID lockdowns in China.

In this month’s report, the cartel cut its world economic growth estimate to 3.5% from 3.9%, having revised down in April its global growth forecast to 3.9% from 4.2%.

Commenting on the global economy, OPEC said that “The upside potential to the current forecast is quite limited. However, it may come from a solution to the Russia and Ukraine situation, fiscal stimulus, where possible, and a fading pandemic, in combination with a strong rise in service sector activity.”

For global oil demand, OPEC now sees growth of 3.36 million bpd in 2022 compared to 2021, down by 310,000 bpd from last month’s estimate. Yet, overall, global oil demand is still set to average above 100 million bpd this year, at 100.29 million bpd, per OPEC’s latest forecast. The second-quarter demand estimate was revised down by a massive 670,000 bpd to 98.44 million bpd, but average global oil demand is set to exceed the 100 million bpd mark in the third and fourth quarters, with Q4 demand seen at 102.64 million bpd.

“Demand in 2022 is expected to be impacted by ongoing geopolitical developments in Eastern Europe, as well as COVID-19 pandemic restrictions,” OPEC said.

“Uncertainties to the forecast remain large, especially given recent geopolitical developments in Eastern Europe. Moreover, high inflation levels, coupled with labour shortages and tighter monetary policies by major central banks may also impact the cost of oil production and investment levels in the upstream beyond the short term,” the cartel noted.

Also on Thursday, the International Energy Agency (IEA) published its monthly report, in which it left its demand forecasts unchanged from last month, expecting 2022 oil demand to rise by 1.8 million bpd on average to 99.4 million bpd.

Despite the loss of supply from Russia, “steadily rising output elsewhere, coupled with slower demand growth, especially in China, is expected to fend off an acute supply deficit in the near term,” the IEA said in its report.

By Tsvetana Paraskova for Oilprice.com

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  • Mamdouh Salameh on May 12 2022 said:
    OPEC+ may have rushed to cut its forecast of global oil demand growth for 2022 based on concerns of China’s lockdown and also geopolitical and economic concerns.

    But oil prices are telling a more optimistic story. Despite the disappearance of the Ukraine conflict premium estimated at $25-$30 a barrel, Brent crude at $108 a barrel today is 14%-15% higher than it was in December 2021. This could reflect a robust global oil demand and a market still in its most bullish state since 2014. The proof is that oil demand this year will exceed 100 million barrels a day (mbd) in the third and fourth quarters of this year and hit 102.64 mbd by the fourth quarter which is higher than both 2019 and 2021.

    And despite the lockdown in some Chinese regions, China tends always to surprise the world exactly as it did in 2020 at the height of the pandemic when its oil imports were 10% higher than in 2019. In fact Petro-china, the biggest refiner in China said recently that fuel consumption in China is rising fast meaning that demand for crude oil is also rising.

    However, global oil demand could have been even higher this year if not for measures being taken by the Central banks in the United States and the EU to tackle rising inflation.

    Dr Mamdouh G Salameh
    International Oil Economist
    Visiting Professor of Energy Economics at ESCP Europe Business School, London

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