OPEC Lowers 2022 Global Oil Demand Forecast by 300,000 B/D

By Geoffrey Smith

The Organization of the Petroleum Exporting Countries (OPEC) has revised its forecast for global oil demand this year, attributing the changes to the impacts of COVID-19 lockdowns in China and the ongoing conflict in Eastern Europe.

In its May report, OPEC now anticipates global demand to grow by an average of 3.4 million barrels per day (b/d) this year, a decrease from its previous estimate of 3.7 million b/d. This adjustment reflects a significant slowdown in demand growth from the first to the second quarter of the year. Demand in the first quarter was up by 5.2 million b/d, but growth is expected to decline to 2.8 million b/d this quarter.

While OPEC did not specifically name China, it cited "COVID-19 pandemic restrictions" that have had a particularly severe impact on the country in recent months. Internal travel demand and business activity have both plummeted due to extensive lockdowns in major areas like the port city of Shanghai, the northeast region of Jilin, as well as in Beijing and Hangzhou. The Chinese government has indicated its commitment to maintaining its "Zero-COVID" policy.

The organization also noted that demand could be further affected by "ongoing geopolitical developments in Eastern Europe," referring to the conflict following Russia’s invasion of Ukraine. This situation has contributed to soaring energy prices in both Europe and the U.S., resulting in signs of demand destruction.

OPEC has also lowered its forecast for Russian oil production by 360,000 b/d for the year, as production sharply declined in April due to difficulties in finding new buyers to replace those from Europe, the U.S., and Japan.

Despite these challenges, OPEC sees only a modest risk that U.S. producers will be able to compensate for the shortfall in global oil supply, maintaining its forecast for U.S. output growth at an average of 1.29 million b/d.

Following the announcement, oil futures saw a decrease of 1.5%, trading at $104.16 a barrel, with earlier losses being moderated.