OPEC on Tuesday stuck to its forecasts for global oil demand growth in 2022 and 2023 after several downgrades, saying that while economic slowdown was “quite evident” there was potential upside such as from a relaxation of China’s zero-COVID policy.
Oil demand in 2023 will rise by 2.25 million barrels per day (bpd), or about 2.3%, the Organization of the Petroleum Exporting Countries (OPEC) said in a monthly report, after growth of 2.55 million bpd in 2022. Both forecasts were unchanged from last month.
“Although global economic uncertainties are high and growth risks in key economies remain tilted to the downside, upside factors that may counterbalance current and upcoming challenges have emerged as well,” OPEC said in the report.
“A resolution of the geopolitical conflict in Eastern Europe and a relaxation of China’s zero-COVID policy could provide some upside potential,” the report said in a separate section.
While keeping the annual demand growth forecasts steady, OPEC trimmed the absolute demand forecasts in the fourth quarter of 2022 and the first quarter of 2023. Chinese demand, hit by COVID containment measures, has contracted in 2022, OPEC said.
Before Tuesday’s report, OPEC had been downgrading its demand forecasts for months and, with the wider OPEC+ alliance, in October had agreed to their biggest oil output cut since 2020. OPEC+ at its last meeting on Dec. 4 left policy unchanged.
In the report, OPEC nudged up its 2022 economic growth forecast to 2.8% and left 2023 steady at 2.5%. As well as the relaxation of China’s COVID policy, the report listed other sources of upside including commodity price weakness.
“Upside potential – or at least counterbalancing factors – may come from the U.S. Federal Reserve successfully managing a soft landing in the United States, as well as from a continued easing of commodity prices and a resolution of the tensions in Eastern Europe,” OPEC said.
Oil prices, which came close to all-time highs in March after Russia invaded Ukraine, have unwound most of their 2022 gains due to slowing economies and the lockdowns in China. Oil was up on Tuesday, trading just below $80 a barrel.
The report also showed that OPEC’s production dropped in November after the wider OPEC+ alliance pledged steep output cuts to support the market amid the worsening economic outlook and weakening prices.
OPEC said its oil output in November fell by 744,000 bpd to 28.83 million bpd.