Many analysts, as well as the White House, saw this move as a political one

OPEC has slashed its global oil demand growth estimates for both 2022 and 2023, a week after announcing a two-million barrels per day (bpd) headline cut to its collective oil production target.

In its closely-watched Monthly Oil Market Report (MOMR), which came out yesterday, OPEC revised down its estimate of global oil demand growth for 2022 by 460,000 bpd, citing China’s COVID lockdowns, economic headwinds in developed economies, and inflationary pressures everywhere.

OPEC now sees world oil demand growing by 2.6 million bpd this year to average 99.7 million bpd. Similarly, the cartel also slashed its oil demand growth forecast for 2023, by 360,000 bpd, expecting growth at 2.3 million bpd next year.

Demand growth would be “subject to headwinds given the uncertainty that surrounds the global economic outlook and factors related to the pandemic,” OPEC reported today. The significant downward revisions to oil demand growth this year and next come after the OPEC+ group announced last week the biggest cut to its collective target since 2020.

QUESTIONS ABOUT REVISED FORECAST

Despite insistence from Russia and all of OPEC+ that the production cut was based on technical market assessments and is aimed at “stability,” many analysts, as well as the White House, saw the move as a political one.

In yesterday’s report, OPEC cited stronger economic headwinds to justify the downward revision to its global oil demand growth forecasts. According to OPEC, “global economic growth has entered into a period of significant uncertainty and deteriorating macroeconomic conditions, amid intensifying challenges including high inflation levels, tightening monetary policies by major central banks, rising interest rates and persisting supply chain issues.

Continuing, the oil cartel contends that, “looking ahead, and despite the usual seasonal hike in oil demand for heating, the challenges presented by the heightened levels of uncertainty, the slowing economic growth and a possible resurgence of COVID restrictions in China and elsewhere are expected to impact oil demand in 2022 and 2023.”

OPEC notes that last week’s decision of OPEC+ to cut two million bpd off its target production level was a pre-emptive and pro-active move “in an ongoing and relentless effort to provide a sustainable stability to the market”.