Opec cuts oil demand forecasts as economic growth slows, says report

Global oil supplies are slowly catching up with flagging demand for crude, leaving the oil market close to balanced, the Organization of the Petroleum Exporting Countries (Opec) said, suggesting the cartel sees little need in the short term to increase its output further.

The Vienna-based producers’ group cut its forecasts for global oil demand this year by 260,000 barrels to 100.03 million barrels a day, citing the impact of slowing global economies. It also cut its demand forecasts for 2023 by the same amount to 102.72 million barrels a day. 

Global economic growth will be weaker than expected both this year and next, as inflation weighs on businesses and consumers and central banks raise interest to cool rising prices, Opec said in its monthly market report released Thursday.

Opec lowered its global gross domestic product forecasts for 2022 to 3.1 per cent from the 

3.5 per cent growth it expected last month. For the US economy, Opec cut its growth forecasts to 1.8 per cent this year from 3 per cent and to 1.7 per cent in 2023 from last month’s 2.1 per cent forecast.

China, the world’s second-largest economy, is expected to grow by 4.5 per cent this year, 0.6 percentage point less than Opec was expecting in July.

A combination of weaker demand for oil and a steady climb in output from both Opec and non-Opec oil producers meant the oil market was close to balanced in the second quarter of the year, with demand exceeding supply by just 50,000 barrels a day.

That compares with a 300,000-barrel-a-day deficit of oil in the first quarter and a 1.6 million-barrel deficit in 2021.

IEA hikes 2022 demand growth

Oil prices rose by over 1 per cent on Thursday after the International Energy Agency raised its oil demand growth forecast for this year as soaring natural gas prices lead some consumers to switch to oil.

Brent crude futures gained $1.29, or 1.3 per cent, to $98.69 a barrel by 1348 GMT, while US West Texas Intermediate crude futures rose $1.45, or 1.6 per cent, to $93.38.

"Natural gas and electricity prices have soared to new records, incentivising gas-to-oil switching in some countries," the Paris-based agency said in its monthly oil report, in which it raised its outlook for 2022 demand by 380,000 barrels per day (bpd).

By contrast, the Organization of the Petroleum Exporting Countries (OPEC) on Thursday cut its 2022 forecast for growth in world oil demand, citing the economic impact of Russia's invasion of Ukraine, high inflation and efforts to contain the pandemic.

OPEC expects 2022 oil demand to rise by 3.1 million bpd, down 260,000 bpd from the previous forecast. However, it still sees a higher overall global oil demand figure than the IEA for 2022.

A rise in US oil inventories last week and the resumption of crude flows on a pipeline supplying central Europe capped further price gains.

US crude oil stocks rose by 5.5 million barrels in the most recent week, the US Energy Information Administration said, more than the expected increase of 73,000 barrels.