Even OPEC’s Predictions Are Bearish For Oil Prices

Key Highlights

• OPEC has cut its 2022 world economic growth forecast
• It has also cut its global oil demand forecast for the year
• It also warns of considerable further downside risks to its growth forecast 

The Organization of the Petroleum Exporting Countries (OPEC) was founded with the specific intention to ‘co-ordinate and unify the petroleum policies’ of all of its member states. This ‘coordination’ means aligning the crude oil production, sales and pricing policies of its members: in other words, doing its utmost to fix the global oil price to the advantage of its members.

Historically, these efforts have been aimed at keeping oil prices high enough to benefit the budgets of its oil-producing members – albeit with the occasional attempt to crash prices in order to disable or destroy the US shale oil sector – so OPEC making effectively bearish comments on oil should be taken seriously.

OPEC Cuts Oil Demand Forecast This Year

According to OPEC, it has cut its global oil demand forecast for 2022 by 480,000 barrels per day (bpd), highlighting weaker economic growth overall plus the likely ongoing effects of COVID outbreaks in China, the world’s top oil importer. These were also factors cited by FX Empire nearly a month ago to predict the subsequent fall in oil prices.

It is now OPEC’s view that global oil demand will average 100.5 million bpd in 2022. Although this figure represents a year-on-year (y-o-y) increase of 3.67 million bpd, it is a significant reduction from the previous forecast of 4.15 million bpd.

“While the COVID-19 pandemic has been the overarching topic for the global economy over the course of two years, the outcome of the latest events in Eastern Europe in combination with the COVID-19 pandemic appear to redefine considerably global economic developments,” said OPEC in its report.

“For the short-term, the impact on global economic growth will be negative. While it is forecast that both Russia and Ukraine will be facing recessions in 2022, the rest of the global economy will be thoroughly impacted as well via a variety of channels,” it added.

OPEC Also Cuts 2022 Global Growth Forecast

OPEC concluded: “By taking these ongoing developments into consideration, while also considering some gradual improvement in 2H22 compared to 1H22, the 2022 global GDP growth forecast was revised down to 3.9 percent from last month’s assessment of 4.2 percent. However, further downside risks to this forecast are estimated to be considerable.”