OPEC cuts world oil demand growth forecast

·3 min read
OPEC cuts world oil demand growth forecast
OPEC said the increased risk of COVID-19 cases, primarily fuelled by the Delta variant, was clouding oil demand prospects going into the final quarter of the year. Photo: STR/NurPhoto via Getty

The Organisation of the Petroleum Exporting Countries (OPEC) has cut its world oil demand growth forecast for this year.

In its monthly report on Wednesday, the group said it now expects oil demand to grow by 5.82 million barrels per day (bpd), down from its initial 5.96 million forecast.

It said the increased risk of COVID-19 cases, primarily fuelled by the Delta variant, was clouding oil demand prospects going into the final quarter of the year.

OPEC highlighted that demand in the third quarter of the year was resilient due to rising mobility and travelling activities, particularly in the Organisation for Economic Co-operation and Development (OECD), it said.

However, its revisions were driven by both the OECD and non-OECD countries, as “the recovery in various fuels is expected to be stronger than anticipated, and further supported by a steady economic outlook in all regions”.

It maintained a growth forecast of 4.2 million bpd for next year.

Watch: Oil prices surge, adding to global energy crunch

The report also revealed that euro-zone economic growth forecasts remain at 4.7% for 2021 and 3.8% for 2022.

The forecast for Japan is also unchanged at 2.8% for 2021 and 2.0% in 2022, while China’s economy is seen to grow at 8.5% in 2021 and 6% in 2022, in line with the previous month’s assessment.

The group of oil-producing countries said, however, that India’s 2021 growth forecast is revised slightly down to 9%, following a weaker-than-expected recovery in the second quarter as the country suffered with rising COVID cases.

It added that natural gas prices at all-time highs could provide a potential headwind to oil demand growth as industrial users switch to oil products as cheaper alternatives.

Read more: Oil hits highest since October 2018 and pound reaches two-week high

"Should this trend continue, fuels such as fuel oil, diesel, and naphtha could see support, driven by higher demand for power generation, refining and petrochemical use," OPEC said.

It came as the International Energy Agency (IEA) warned of increased volatility and further price rises.

Separately on Wednesday it said that the world was failing to invest in energy on the scale that was needed to avoid sharp rises in fossil fuel prices, and escape catastrophic climate change.

Fatih Birol, head of the IEA, said there was a "looming risk of more turbulence for global energy markets".

Oil prices have surged this year as a rebound from the pandemic also drove demand and depleted reserves. Brent crude (BZ=F) prices stood at just under $83 (£61) per barrel on Wednesday afternoon.

This month OPEC+, which is an alliance between OPEC and other producers led by Russia, agreed to stick with a plan for a 400,000 bpd production increase for November as it slowly unwinds the output cuts it made to support previously low prices.

Watch: Pent-up demand and supply shortages help to fuel surging global oil prices

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