OPEC lowered its projection for global economic growth in its Monthly Oil Market Report (MOMR) released on Thursday, saying oil demand will expand by 310,000 barrels per day (bpd), less than expected in the April report. The cartel reduced its global economic growth forecast to 3.5% from 3.9% in this month’s report after revising its global growth forecast to 3.9% from 4.2% in April.
In April, OPEC lowered its oil demand growth forecast for 2022 by 480,000 bpd, citing weaker predicted global economic growth and the reintroduction of COVID lockdowns in China as reasons.
For the second month in a row, slower global economic development, China’s war against COVID, and Russia’s war with Ukraine forced OPEC to drop its global oil demand growth projection for 2022.
OPEC now forecasts global oil demand growth of 3.36 million bpd in 2022, down 310,000 bpd from last month’s forecast. Nonetheless, according to OPEC’s latest prediction, global oil consumption will average above 100 million bpd this year, at 100.29 million bpd.
The demand estimate for the second quarter was reduced by 670,000 bpd to 98.44 million bpd, but average global oil demand is expected to exceed 100 million bpd in the third and fourth quarters, with Q4 demand estimated at 102.64 million bpd.
EXCERPTS FROM OPEC’S REPORT
“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.”
“Demand in 2022 is expected to be impacted by ongoing geopolitical developments in Eastern Europe, as well as COVID-19 pandemic restrictions.”
“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.”
