RIYADH: While the world is struggling with economic challenges, global oil consumption is still expected to increase year-on-year by 2.16 million barrels per day to 99.89 mbpd in 2022, said King Abdullah Petroleum Studies and Research in its latest outlook for the fourth quarter of 2022.
This is a minor upward revision of 10,000 bpd from its previous forecast in the third quarter of 2022.
“These revisions reflect healthy reports by several countries on road, air and maritime activity, and slower economic activity in others, through 2022,” said the report titled KAPSARC Oil Market Outlook.
It noted that declining gross domestic product growth in the fourth quarter of 2022 will add downward pressure to the underlying seasonality of oil demand trends in several countries, playing an important role in oil demand declines this quarter.
Since the third quarter of this year, KAPSARC said global oil demand has finally caught up to pre-pandemic levels. “Overall, we anticipate quarter-on-quarter growth in OECD consumption of roughly 640 kbpd, while oil demand growth in non-OECD countries is expected to decline by roughly 120 kbpd,” the quarterly report noted.
The report further noted that year-on-year growth demand from the Organisation for Economic Co-operation and Development countries will contribute 960 kbpd of the overall demand growth in 2022.
Given a challenging GDP forecast for the first half of 2023 for several OECD countries, KAPSARC said OECD demand in 2023 is only expected to grow by another 520 kbpd.
For 2022, OECD Americas, led by the US, will carry 490 kbpd of this year’s growth, it said. Whereas, Europe will follow with the growth of 320 kbpd, with the UK representing 40 percent of OECD Europe’s demand growth.
The report noted that the remaining growth is expected to come from OECD Asia-Oceania, with South Korea representing roughly 50 percent of the region’s growth. Non-OECD demand growth is expected to reach 1.20 mbpd this year and 1.39 mbpd next year.
KAPSARC has revised its projection for China’s previous demand growth down to 90 kbpd as a result of lower GDP growth projections, with lower transport activity accompanying its continuing stringent zero-COVID-19 strategy.
In terms of non-OECD countries, the KAPSARC report made significant changes in Saudi Arabia with an upward revision to 180 kbpd growth in 2022. “While GDP growth plays an important factor in estimating demand growth for oil, we notice that Saudi aviation activity has almost doubled since last year and maritime activity has continued to rise,” the report noted.
The Saudi advisory think tank said in its outlook report that global oil demand growth will continue its recovery from COVID-19 through 2024.
On the supply side, the KAPSARC report predicted that the world would witness 230 kbpd of net global growth this quarter. However, it noted that the Organization of the Petroleum Exporting Countries and its allies concluded their 33rd OPEC and a non-OPEC ministerial meeting on Oct. 5 and agreed to “adjust downward the overall production by 2 mbpd from the August 2022 required production levels, starting November 2022.”
This means that OPEC+ will witness an overall quarter-on-quarter decline of 465 kbpd, bringing global production to a decline of only 400 kbpd.
“Despite healthy growth from non-OPEC+ producers, they are expected to stagnate this quarter with a mere 65 kbpd. One of the leading reasons for the stagnating production growth in liquids this quarter comes from Brazil’s seasonal biofuels, which tends to peak in Q3 then decline in Q4,” the report noted.