OPEC flags global economic uncertainty risk to OECD oil demand

OPEC has warned of potentially weaker summer demand in OECD nations in the second and third quarters of this year.

PHOTO: View of the OPEC headquarters in Vienna, Austria. Getty Images

OPEC now expects OECD countries to consume lower volumes of crude in the second quarter of this year.

In its latest oil market report, OPEC has forecast that OECD nations will consume 45.55 million b/d of oil in the second quarter of this year, an 80,000 b/d decline from OPEC's March prediction.

The group has forecast OECD demand to average at 46.87 million b/d in the third quarter of this year, down around 200,000 b/d from its March outlook.

OECD crude demand is expected to average 46.10 million b/d through 2023. This too is a downward revision of 130,000 b/d from the March forecast.

Economic weakness in the US, from the "ongoing monetary tightening measures" by the Federal Reserve could lower the nation's oil demand, OPEC warned. Meanwhile, slowing economic activity would likely "continue to challenge" European crude demand too, it said.

Surprise cuts

Explaining the OPEC+ production cuts, the organisation said its member nations and allies will voluntarily cut production starting from May due to “uncertainties surrounding current oil market dynamics.”

Those dynamics include concerns around a tepid global economic growth this year and rising crude oil stockpiles.

“Moreover, the impact of the recent reopening of China has still not been sufficient to reverse the declining trend in global refinery intakes", OPEC said.

Global outlook

OPEC has maintained its forecast for global oil demand growth. The oil producers' group has projected global oil demand to grow by 2.3 million b/d this year to 101.9 million b/d.

The group has also raised its non-OECD oil demand forecast by 130,000 b/d from its earlier projection. Non-OECD demand is now expected to average 55.80 million b/d this year.

OPEC cited “better-than-expected improvements in economic activity in China after its zero-COVID-19 policy was discontinued” as the main reason for the upward revision.

By Konica Bhatt

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