Opec slashes 2022 oil demand forecast on China restrictions and global economic challenges

The oil producers group also lowered its economic growth projection

The Opec logo in Vienna, Austria. The group said economic growth has entered a period of 'significant' uncertainty and 'deteriorating' macroeconomic conditions. AP

Opec lowered its global oil demand forecast for 2022 and 2023, citing Covid-19 restrictions in China, economic challenges in Europe and inflationary pressures in key economies.

Global oil demand will increase by 2.6 million barrels per day in 2022, lower than Opec’s previous estimate of 3.1 million bpd, the group of oil-producing countries said in its monthly oil market report on Wednesday.

World oil demand in 2023 will grow by 2.3 million bpd, down from an earlier estimate of 2.7 million bpd.

Opec said economic growth had entered a period of “significant” uncertainty amid “deteriorating” macroeconomic conditions.

“Geopolitical risks, extensions of Covid-19 related lockdowns and flare-ups of the pandemic in the Northern Hemisphere during [the] winter season remain uncertain,” the group said.

Oil demand in Organisation for Economic Co-operation and Development countries will grow by 1.4 million bpd in 2022, down from earlier expectations of 1.6 million bpd.

Demand for crude produced by Opec countries this year will stand at 28.7 million bpd, 200,000 bpd lower than its earlier estimate.

Demand for the group's crude has been revised down by 300,000 bpd in 2023.

Opec also forecast global economic growth of 2.7 per cent and 2.5 per cent in 2022 and 2023, respectively. This is a downward revision from the organisation’s previous estimate of 3.1 per cent in each year.

On Tuesday, the International Monetary Fund cut its growth forecast for 2023 and warned of a cost-of-living crisis as the global economy continues to be affected by the war in Ukraine, broadening inflation pressures and a slowdown in China.

A potential slowdown in China, the world’s largest crude oil importer, and signs that the US Federal Reserve could announce further rate increases have triggered a sell-off in oil markets this week.

Oil prices gained about 10 per cent last week as the 23-member Opec+ group of oil producers announced an output cut of 2 million bpd.

Opec+ is “here to stay as a moderating force to bring about stability”, Saudi Energy Minister Prince Abdulaziz bin Salman said during a press conference after the meeting.

“Energy is something that can never be attended to in short-term tweaks and moves … the world energy markets need attendance, careful planning and investments,” he said.