OPEC cuts oil demand growth forecast again

The Organisation of the Petroleum Exporting Countries (OPEC) on Thursday cut its 2022 forecast for growth in world oil demand for a third time since April, citing the economic impact of Russia’s invasion of Ukraine, high inflation and efforts to contain the coronavirus pandemic.

The view from OPEC contrasts with that of the International Energy Agency (IEA), the adviser to industrialised countries, which earlier on Thursday raised its 2022 demand growth outlook.

OPEC in a monthly report said it expects 2022 oil demand to rise by 3.1 million barrels per day (bpd), or 3.2%, down 260,000 bpd from the previous forecast. The IEA raised its forecast by 380,000 bpd to 2.1 million bpd.

Oil use has rebounded from the worst of the pandemic and is set to exceed 2019 levels this year even after prices hit record highs. However, high prices and Chinese coronavirus outbreaks have eaten into OPEC’s 2022 growth projections.

“Global oil market fundamentals continued their strong recovery to pre-Covid-19 levels for most of the first half of 2022, albeit signs of slowing growth in the world economy and oil demand have emerged,” OPEC said in its report.

OPEC cut its 2022 global economic growth forecast to 3.1% from 3.5% and trimmed next year’s to 3.1%, saying that the prospect of further weakness remained.

“This is, however, still solid growth, when compared with pre-pandemic growth levels,” OPEC said. “Therefore, it is obvious that significant downside risk prevails.”

Oil prices held on to an earlier gain after the OPEC report was released, finding support from the IEA’s view on demand and trading above $98 a barrel.

Published in The Express Tribune, August 12^th, 2022.

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