On Thursday, the Organization of Petroleum Exporting Countries (OPEC) announced that they cut its world oil demand forecast for the last quarter of 2021.
The reason? High energy prices are limiting the efforts of countries to recover from the COVID pandemic. This means that the timeline for oil returning to pre-pandemic levels will take longer.
RELATED: OPEC+ Won’t Raise Oil Production Output Despite US Pressure
OPEC Cut 2021 World Oil Demand Forecast, Raises US Shale Supply Estimates
In its latest monthly report, OPEC also raised the supply forecast of oil from US shale producers in 2022. This is a potential headwind to OPEC and OPEC+ member allies to balance the global oil market. The organization said its new oil demand forecast will average 99.49 million barrels per day during the fourth quarter of 2021. This is down 330,000 barrels per day (BPD) compared to last month’s forecast. OPEC cut its 2021 demand growth forecast by 160,000 BPD to 5.65 million BPD. The year’s demand growth forecast was trimmed by 160,000 BPD to 5.65 million BPD. “A slowdown in the pace of recovery in the fourth quarter of 2021 is now assumed due to elevated energy prices,” OPEC reported. It cited slower-than-expected demand in China and India for the world oil demand forecast revision. With lower demand, OPEC said it expects the world to need 28.7 million BPD from its members in 2022. This rate is down to 100,000 BPD from last month. However, it still allows for higher OPEC production.
Oil Prices At Three Year Highs
Despite the increased demand from reopening economies, OPEC+ decided to gradually increase the supply of oil. As a result, prices of oil rose to three-year highs exceeding $86 a barrel. Fuel prices in many countries are now displaying their highest rates in years. In addition, natural gas, coal, and power prices also soared to record highs. Meanwhile, governments and businesses continue to monitor the recovery rate of their economies. A slower pace could ease the current upward pressure on prices. It can also help bolster the idea that the pandemic caused the demand for oil to lower permanently.
100 BPD Global Demand to Happen by 3Q 2022, Not 2Q
As a result of their oil demand forecast adjustments, OPEC now believes that the 100 million BPD demand will happen a quarter later than expected. Instead of the second quarter of 2022, OPEC now sees the third quarter as the probable target date. The last time the world needed 100 million BPD was in 2019. OPEC also stuck to its forecast that demand will rise by 4.15 BPD by next year. If this comes true, the average consumption of 100.6 million BPD will happen as well, exceeding 2019 rates. Despite the report, oil prices hardly changed yesterday. Prices remained just below $83 a barrel, which is up from an earlier decline. Meanwhile, OPEC+ is gradually returning back the production cuts it made last year. In July, it agreed to raise output by 400,000 BPD a month beginning August. As a result, oil output rose in October by 220,000 BPD to 27.45 million BPD. Top oil producer Saudi Arabia provided half of the 220,000 BPD rise. However, four of the 13 OPEC members could not deliver their commitment to raise output due to lack of capacity.
OPEC Sees US Shale Rising By 610,000 in 2022
OPEC also sees the potential increase of US oil production. The group forecasted that US tight oil (shale) will rise by 610,000 BPD in 2022. This is 200,000 BPD more from last month’s forecast. Higher oil prices are prompting more investments in the industry. Watch the WION news video reporting that petroleum exporting countries’ organization trims world oil demand growth forecast:
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