London (Reuters): OPEC cut its prediction for the growth of world oil demand in 2022 for the fourth time since April. They also cut their predictions for next year. They did this because economies are slowing, China’s COVID-19 containment measures are coming back, and inflation is high.
In a monthly report, the Organization of the Petroleum Exporting Countries (OPEC) said that oil demand will rise by 2.7%, or 2.64 million barrels per day (bpd), in 2022. This is 460,000 bpd less than what was predicted before.
In the report, OPEC said, “The world economy has entered a time of greater uncertainty and growing problems.” This is because of things like high inflation, monetary tightening by major central banks, high levels of sovereign debt in many regions, and ongoing supply problems.
The fact that demand is expected to go down helps explain why OPEC and its allies, known as OPEC+, cut their output by the most since 2020 last week to help the market. The United States didn’t agree with the choice. But on Wednesday, the U.S. Energy Department also cut its predictions for the world’s production and consumption in 2023.
Even after the downgrade, OPEC still thinks that demand will grow faster this year and next than the International Energy Agency predicts. The International Energy Agency will release its latest predictions on Thursday.
OPEC thinks that oil demand will go up by 2.34 million bpd next year, which is 360,000 bpd less than what was predicted before. This will bring oil demand to 102.02 million bpd. OPEC still thinks that demand will be higher in 2023 than it was before the pandemic.
The U.S. Energy Department, on the other hand, thinks that demand will grow by 1.5% to 101.03 million bpd in 2023. This is less than the 101.50 million bpd that was predicted last month. It also thinks that production will only go up by 0.8% to 100.73 million bpd next year.
OPEC lowered its estimate for the growth of the world economy in 2022 from 3.1% to 2.7%. It also lowered its estimate for the growth of the world economy in 2019 to 2.5% and said that it could get worse.
“There are still major risks to the downside,” OPEC said, adding that there was only a small chance that things would go up, such as if the European Union and China changed their budgets or if the Ukraine War ended.
Oil prices, which have been going down because people are worried about the economy, went below $93 a barrel at the end of the day.
SUPPLY RISEM Most of this year, OPEC+ has been increasing oil production to undo the record cuts made in 2020 because of the pandemic.
The group’s decision for September 2022 was to raise its output goal by 100,000 bpd, with about 64,000 bpd coming from the 10 countries that were part of OPEC.
The report showed that OPEC’s output went up by 146,000 bpd in September, to 29.77 million bpd. Saudi Arabia and Nigeria lead the way in this increase.
Still, OPEC is pumping a lot less oil than the OPEC+ deal calls for because some of its members aren’t putting enough money into oil fields.
OPEC thinks that the world will need an average of 29.4 million barrels per day (bpd) of its crude next year. This is down 300,000 bpd from last month and means that there will be a surplus of 370,000 bpd if production stays at September’s rate and all other things stay the same.
Still, the output cut that OPEC and other countries agreed to last week will last for all of 2023 and is much bigger, at 2 million bpd.