OPEC on Tuesday kept its oil demand growth forecast for 2023 mostly unchanged from last month but warned of increased economic uncertainties ahead due to high interest rates and persistent inflation.
OPEC sees global oil demand growth at 2.35 million barrels per day (bpd) this year in its closely-watched Monthly Oil Market Report (MOMR) out on Tuesday, essentially unchanged from the 2.33 million bpd estimate in last month’s report.
The overwhelming part of the growth will come from non-OECD economies, where oil demand is set to rise by around 2.3 million bpd, while OECD oil demand will grow by only 50,000 bpd, the latest report showed.
While the cartel kept its oil demand growth assessment for 2023 unchanged for a fourth consecutive month, it warned of higher risks regarding economic growth.
Global economic growth is expected at 2.6% this year, unchanged from the May report, but OPEC noted that “While economic activities have been steady so far in the 1H22, the global economy continues to navigate through uncertainties including high inflation, higher interest rates in the US and the Euro-zone, and high debt levels in many regions.”
According to OPEC, “there are rising uncertainties regarding economic growth in 2H23 amid ongoing high inflation, already elevated key interest rates and tight labour markets.”
“Moreover, it is still unclear as to how and when the geopolitical conflict in Eastern Europe might be resolved,” said OPEC, referring to the Russian invasion of Ukraine.
So far this year, the positive effects of China’s reopening have continued to support global economic growth, and the resilient US growth has also helped.
In the second half of 2023, oil demand in the non-OECD is forecast to grow on average by 2.2 million bpd year-on-year, with China remaining the largest contributor to demand growth, OPEC noted.
But the recent banking sector turbulence and high sovereign debt in many economies could be concerns for capital markets and financial stability, according to the cartel.
Upsides to the economic and oil demand growth could come from “an even stronger-than-anticipated rebound in China” as well as the U.S. keeping the first-half growth momentum and managing at the same time a soft landing after all the rate hikes, OPEC said.
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By Charles Kennedy for Oilprice.com
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However, OPEC+ paints a picture of two worlds in terms of economic growth in 2023: the non-OECD overwhelmingly dominated by the Asia-Pacific region and the OECD region dominated by the United States and the EU.
While the Asia-Pacific region will account for 2.2 mbd or 94% if the projected global oil demand of 2.3 mbd in 2023 with China contributing 1.15 mbd or 50% of demand, the OECD oil demand will grow by only 50,000 barrels a day (b/d) or 2% of the total.
And while global economic growth is expected at 2.6% this year, the non-OECD particularly China and the Asia-Pacific region will grow at 4.6% up from 3.8% in 2022 and will account for 70% of global growth in 2023 compared with 0.8%-1.3% in the OECD.
Inflation in the Asia-Pacific region in 2023 is projected at 3.9% down from 4.2% in 2022 compared with 7.0% in the world, 4-9% in the US and 7.0% in the EU.
Still, OPEC+ warns of rising uncertainties regarding economic growth in 2023 amid ongoing high inflation already elevated by key interest rates, concerns about the global banking system and high sovereign debt in many economies.
Dr Mamdouh G Salameh
International Oil Economist
Global Energy Expert