In its monthly report, the Organization of the Petroleum Exporting Countries (OPEC) on Wednesday (Oct 12) cut its forecast for world oil demand growth in 2022 for the fourth time since April. OPEC also cut its forecast for oil growth next year, citing factors such as high inflation and a slowing economy.
OPEC’s monthly report said it expects global oil demand to grow by 2.64 million b/d in 2022, compared with 3.1 million b/d previously. Global crude demand growth in 2023 is expected to be 2.34 MMBPD, down 360,000 BPD from the previous estimate to 102.02 MMBPD.
“The global economy has entered a period of increased uncertainty and challenges, with persistently high inflation, monetary tightening by major central banks, high sovereign debt levels in many regions, and ongoing supply chain issues,” OPEC said in the report.
The declining demand outlook justifies OPEC+ ‘s decision last week to cut output by 2 million barrels per day (BPD), the biggest cut since 2020, in an effort to stabilize prices.
Saudi Arabia’s energy minister blamed the cuts on complex uncertainties, while several agencies downgraded their forecasts for economic growth.
U.S. President Joe Biden strongly criticized OPEC+ ‘s decision to cut production, saying it boosted oil revenues for Russia, a key OPEC+ member. Mr. Biden threatened that the United States needed to reassess its relationship with Saudi Arabia, but he did not specify what that would be.
Wednesday’s report also showed that 13 OPEC members collectively increased output by 146,000 barrels a day in September to 29.77 million barrels a day, a symbolic boost that followed Biden’s visit to Saudi Arabia this summer.
Still, most OPEC members are far short of their production targets as they face problems such as underinvestment and operational disruptions.
OPEC also cut its forecast for global economic growth this year to 2.7 percent from 3.1 percent and for next year to 2.5 percent. OPEC warned that major downside risks remained and that the global economy was likely to weaken further.