OPEC on April 12 lowered its 2022 global oil demand forecast by 480,000 b/d, citing weaker economic growth along with the outbreak of the omicron variant in China, and indicated the market was in surplus in the first quarter of 2022.
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OPEC now expects global oil demand to average 100.5 million b/d in 2022, for year-on-year growth of 3.67 million b/d, the organization said in its closely watched oil market report. That's down from a growth of 4.15 million b/d projected last month for 2022 and an increase of 5.7 million b/d for global oil demand in 2021.
The resurgence of COVID-19 in China and Russia's invasion of Ukraine at the end of February will leave global economic growth at 3.9% this year, down from last month's assessment of 4.2%, OPEC said. The outbreak in China left Q1 2022 global oil demand growth at 400,000 b/d on the year, compared with 800,000 b/d in Q4 2021, it noted.
"While the COVID-19 pandemic has been the overarching topic for the global economy over the course of two years, the outcome of the latest events in Eastern Europe in combination with the COVID-19 pandemic appear to redefine considerably global economic developments," OPEC said. "For the short-term, the impact on global economic growth will be negative" with inflation "the main factor impacting the global economy."
Demand for OPEC crude averaged 28.25 million b/d in Q1 2022, below the 28.37 million b/d produced by the bloc, the organization said. The market was in deficit for every quarter last year. But OPEC expects the demand for its crude to start rebounding in Q3 2022 and reach 30 million b/d by Q4 2022.
With OPEC raising production in concert with Russia and eight other allies by about 400,000 b/d each month, the volumes could be more than enough to satisfy global demand, especially with the US, Japan and other members of the International Energy Agency releasing strategic reserves to combat high energy prices.
In fact, the coalition expects the oil market to be in surplus in every quarter of 2022, including a full-year oversupply of 1.3 million b/d, according to a report prepared for delegates by the OPEC secretariat and seen by S&P Global Commodity Insights. The OPEC+ alliance, which controls nearly half of global oil supply, has gradually rolled back the record production cuts it instituted during the worst of the pandemic, saying it aims to balance supply with emerging demand from the recovery.
The alliance next meets on May 5.
OPEC and its allies "continue to reaffirm their unwavering commitment to supporting oil market stability by ensuring adequate crude oil supply to the global market," OPEC said in the report.