OPEC left its forecast for global oil supply and demand largely unchanged on Monday as it warned that major unknowns such as China’s Covid-19 cases and the impact of Western efforts to thwart Russian oil exports made the outlook for energy markets highly uncertain.
In its closely watched monthly market report, the Organization of the Petroleum Exporting Countries revised its global oil demand forecast slightly downwards while making minor changes to its supply forecast and refraining from changing its forecasts for global economic growth.
The oil producers’ group cited a series of “considerable uncertainties” clouding the picture of global oil supply, from the course of Russia’s war in Ukraine to a Group of Seven-led plan to cap oil supplies. Russian oil prices, which analysts say could further disrupt global oil supplies.
While it kept its forecasts for economic growth and oil demand largely unchanged, OPEC also warned that the threat of “further energy supply disruptions” in the European Union – an apparent hint at imminent plans of the bloc aimed at banning imports of Russian oil – was likely to get worse. ‘ the continent’s slowdown and plunging it into a recession.
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OPEC has lowered its forecast for global oil demand growth this year from 100,000 barrels per day to 2.5 million barrels per day. It also lowered its demand growth forecast for 2023 from 100,000 barrels per day to 2.2 million barrels per day.
OPEC has made minor adjustments to its expectations for oil supplies to non-cartel oil-producing nations. It lowered its non-OPEC supply growth forecast for 2022 from 30,000 barrels per day to 1.90 million barrels per day. For 2023, it raised its forecast by 20,000 barrels per day to 1.54 million barrels per day.
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The cartel left its forecast for global economic growth steady at 2.7% this year and 2.5% in 2023.
Still reeling from the fallout from Russia’s invasion of Ukraine and the resulting disruption to global oil supplies, the oil market is bracing for new sanctions against Russia that are expected to take effect early next month, which threatens to further reshape global oil supply.
On December 5, the EU is preparing to ban imports of Russian crude oil while prohibiting its companies from insuring and financing Russian oil exports anywhere in the world. The UK has said it will also exclude Russian oil shipments from its marine insurance market in London.
On the same day, a Russian oil price cap plan being prepared by the G-7 countries is expected to go into effect. The plan will allow Western companies to facilitate Russian oil exports if the oil is sold at or below a certain level.
Another major uncertainty for the oil markets: OPEC itself. The cartel and its Russian-led allies are to meet the day before the sanctions take effect and consider adjusting their oil production. OPEC production alone accounts for about 40% of the world’s oil supply.
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At its last meeting in early October, the group known collectively as OPEC+ agreed to cut its production targets by 2 million barrels per day, its biggest production cut since the start of the pandemic. The move drew criticism from Western oil-consuming countries such as the United States, as it threatened to drive up oil prices and add to inflationary pressures in the global economy.
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