OPEC slashes oil demand growth forecasts amid deteriorating economic outlook

Quantum Commodity Intelligence - OPEC has made a sharp downwards adjustment to its global oil demand growth forecast for both this year and 2023 in response to a deteriorating economic outlook, proving a drag on fourth-quarter demand growth.

The producer alliance said in its monthly report demand for oil will increase by 2.64 bpd this calendar year, or 2.7%, down some 460,000 bpd from the previous forecast.

This is the fourth time since April that OPEC has cut its 2022 forecast for growth in world oil demand and also trimmed next year's figure, citing slowing economies, the resurgence of China's Covid-control measures and high inflation.

"The world economy has entered into a time of heightened uncertainty and rising challenges, amid ongoing high inflation levels, monetary tightening by major central banks, high sovereign debt levels in many regions as well as ongoing supply issues," OPEC said in the Monthly Oil Market Report (MOMR).

The downgrade to consumption gives further insight into the motivations for the headline 2 million bpd cut agreed on 5 October, leading to a major schism between the US and Saudi Arabia, analysts said.

For 2023, demand growth was revised down by 360,000 bpd to 2.34 million bpd.

"Risks are skewed to the downside, with slowing growth in the global economy," OPEC's Vienna-based research team said in the MOMR.

Combined with "a possible resurgence of Covid restrictions in China and elsewhere," the oil market may miss out on the typical seasonal uptick in consumption, it said.

The group now sees demand in China, the world's largest crude importer, dropping by 60,000 bpd this year, whereas last month it still expected Chinese demand would rise by 120,000 bpd in 2022.

OPEC sees demand for its own production at 28.68 million bpd this year and 29.45 million bpd in 2023, down by a respective 200,000 bpd and 300,000 bpd from last month's report.

On the supply side, the MOMR cut its forecast for non-OPEC liquids growth to 1.93 million bpd this year, down by 180,000 bpd from the previous report. US oil output growth was reduced by 20,000 bpd from last month to 1.09 million bpd in 2022.