OPEC slashed on Tuesday its oil demand growth estimate for 2022 by nearly 500,000 barrels per day (bpd) on the back of lower expected global economic growth with the Russian war in Ukraine and the return of COVID lockdowns in China.
In its closely watched Monthly Oil Market Report (MOMR), the cartel now sees global oil demand growth this year at 3.67 million bpd, down by 480,000 bpd from last month's growth estimate of 4.15 million bpd, mostly to reflect OPEC's downward revision to economic growth expectations.
Total oil demand is now seen averaging 100.5 million bpd in 2022, down from 100.91 million bpd expected in the March report.
To be sure, OPEC had already flagged in March that its global oil demand growth estimate "remains under assessment" "until more clarity prevails."
Last month's report was the first OPEC issued since its key partner in the OPEC+ alliance, Russia, invaded Ukraine at the end of February. While OPEC has refrained from specifically putting the word "war" in its two reports since the Russian invasion of Ukraine, the downward revisions to global economic growth and oil demand growth in the April report were due to the "recent geopolitical developments in Eastern Europe" and soaring inflation globally, it said.
OPEC cut its estimates for global economic growth in 2022 to 3.9% from 4.2% in the previous month's assessment.
"This takes into account the impact of the conflict in Eastern Europe, as well as the ongoing effects from the pandemic, with the risks skewed to the downside," the cartel said.
Therefore, the estimate of oil demand growth was lowered by 480,000 bpd, "accounting for declines in global GDP on account of the geopolitical developments and the resurgence of the Omicron variant on global oil demand in China."
During the first quarter of 2022, global oil demand jumped by nearly 5 million bpd year over year as most countries relaxed COVID-related restrictions, OPEC has estimated.
"However, due to recent geopolitical developments in Eastern Europe, 2Q22 and 3Q22 are both forecast at growth of 3.5 mb/d y-o-y," the cartel noted.
By Tsvetana Paraskova for Oilprice.com
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It is possible that the skyrocketing energy prices have become a real burden on the economies of consumers around the world.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London