The Organization of the Petroleum Exporting Countries expects significantly lower oil demand growth this year than originally anticipated. Therefore, OPEC is lowering its outlook. The reason is partly the war in Ukraine, partly the rising inflation or the coronavirus situation in China.
Demand will increase less than anticipated
According to the Organization of the Petroleum Exporting Countries, global oil demand will increase by an average of 3.36 million barrels per day this year. That’s about 310,000 barrels per day less than OPEC estimated in its previous forecast. “Demand is likely to be hit by ongoing developments in the eastern part of Europe. The restrictions that have been put in place due to the spread of the coronavirus outbreak in China will affect the demand as well,” the organization said.
Risk in rising inflation
Still, daily oil demand is expected to exceed 100 million barrels per day in the third quarter of this year. The daily average for the whole of this year should then be slightly higher than in 2019. That means returning to the pre-pandemic levels.
There are, however, more reasons, than just coronavirus restrictions in China and war in Ukraine. OPEC sees rising global inflation and the associated expectation of monetary policy restrictions in a number of countries as an additional risk to oil demand. This, too, can have a negative influence on oil demand.
