The Organization of Petroleum Exporting Countries (OPEC), expects a world oil demand growth of 3.1 mb/d for 2022, a downward revision by 0.3 mb/d from last month’s projection (3.4 mb /d).
The downgrade of the global oil demand growth was in light of the likelihood of continuing challenges with regard to global occurrences – rising inflation and financial tightening, the pandemic and rising geopolitical tensions, and global economic growth potential which was revised downward for both 2022 and 2023.
This is according to the newly released OPEC Monthly Oil Market Report (MOMR) – August 2022.
According to OPEC, the 3.1 mb/d growth projection for 2022 is healthy as total oil demand is expected to average around 100 mb/d in 2022.
Expectations that the world economy will rebound, together with anticipated improvements in COVID-19 containment in China, are seen to boost the consumption of oil in 2023. Upon that premise, the International oil organization maintained the last MOMR forecast for 2023 world oil demand growth at 2.7 mb/d and expects the 2023 world oil demand to reach 102.72 mb/d.
The recovery in transportation and industrial fuel demand including petrochemicals is seen to drive the increase in oil demand in 2023. In the non-OECD, oil demand is projected to rise by 2.1 mb/d, with China and India having a significant chunk of this demand. In the OECD, OPEC foresees a 0.6 mb/d rise in oil demand, with the US, OECD Europe, and the Asia Pacific demand anticipated to rise above the pre-pandemic consumption levels.
In July, crude oil production by OPEC-13 increased by 216 tb/d m-o-m to average 28.90 mb/d, according to OPEC secondary sources. Also, the global oil supply in July increased by 1.7 mb/d m-o-m to average 100.6 mb/d, up by 4.7 mb/d y-o-y. However, the share of OPEC crude oil in total global production decreased to 28.7% in July compared with the previous month.
OPEC NGLs and non-conventional liquids production in 2022 is forecast to grow by 0.1 mb/d to average 5.39 mb/d. By 2023, it is forecast to grow by 50 tb/d to average 5.44 mb/d.
Non-OPEC liquids supply growth in 2022 and 2023 remains unchanged at 2.1 mb/d for an average of 65.8 mb/d, and 1.7 mb/d to average 67.5 mb/d respectively.
A 28.7% contribution to global production by OPEC-13 suggest supply shortages, highlighting the need for OPEC members to raise production as some members are still producing below quota.
How This Affects Nigeria
Despite significantly declining consumer sentiment in major economies, the growth projection by OPEC for the rest of 2022 and 2023 is still buoyant. Strong demand projections in advanced economies, particularly for transportation fuel and industrial fuel, create an opportunity for a windfall gain for Nigeria, considering the country’s efforts in solving crude oil theft and pipeline vandalism bedeviling the sector.
The NNPC recently launched an application for monitoring crude oil theft and pipeline vandalism and is partnering the government regulatory bodies, security agencies, and host communities to establish a robust framework to retrench the menace.
However, things could turn the other way. With record-breaking inflation, monetary tightening by central banks, the pandemic in China, rising geopolitical tensions in eastern Europe, elevated supply chain issues, and high sovereign debt levels in many regions, global economic growth is still faced with risks tilted to the upside and this can adversely impact oil market.