OPEC left its forecast for global oil supply and demand largely unchanged Monday, as it warned that major unknowns such as Covid-19 cases in China and the impact of Western efforts to frustrate Russian oil exports made the outlook for energy markets highly uncertain.
In its closely followed monthly market report, the Organization of the Petroleum Exporting Countries modestly revised lower its forecast for global oil demand while making small tweaks to its supply forecasts and holding off from making changes to its global economic growth forecasts.
The oil producers group cited a raft of "considerable uncertainties" clouding the picture for global oil supplies from the course of Russia’s war in Ukraine to a Group of Seven-led plan to cap Russian oil prices which analysts fear could further disrupt global oil supplies.
While it kept its forecast for economic growth and oil demand largely unchanged, OPEC also warned that the threat of "additional energy-supply disruptions" in the European Union—an apparent allusion to the bloc’s impending plans to ban imports of Russian oil—risked heightening’ the continent’s slowdown and pushing it into a recession.
OPEC lowered its forecast for global oil demand growth this year by 100,000 barrels a day to 2.5 million barrels a day. It also lowered its 2023 demand growth forecast by 100,000 barrels a day to 2.2 million barrels a day.
OPEC made minor adjustments to its expectations for oil supplies from oil-producing nations which aren’t part of the cartel. It lowered its non-OPEC supply growth forecasts for 2022 by 30,000 barrels a day to 1.90 million barrels a day. For 2023, it raised its forecasts by 20,000 barrels a day to 1.54 million barrels a day.
The cartel left its forecasts 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 disruption to global oil supplies that resulted, the oil market is bracing for fresh sanctions on Russia set to come into force early next month which threaten to further redraw global oil supplies.
On Dec. 5, the EU is set to ban imports of Russian crude oil while prohibiting its companies from insuring and financing Russian oil exports anywhere in the world. The U.K. has said it would also exclude Russian oil cargoes from its London shipping insurance market.
On the same day, a plan to cap Russian oil prices being prepared by the G-7 nations is set to come into force. 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 oil markets: OPEC itself. The cartel and its Russia-led allies are set to meet the day before the sanctions come into force and consider adjusting their oil production. OPEC’s production alone accounts for around 40% of global oil supplies.
At its last meeting in early October, the group known collectively as OPEC+ agreed to slash its output targets by 2 million barrels a day, its largest production cut since the beginning of the pandemic. The move drew criticism from Western oil-consuming nations such as the U.S. as it threatened to send oil prices higher and add to inflation pressures across the global economy.