Feb. 14 (UPI) — Raising their global demand forecast for crude oil, economists at the Organization of the Petroleum Exporting Countries said Tuesday most of the surge is expected from the use of transportation fuels.
“Consumption of both gasoline and diesel is forecast to increase by around 1.1 million barrels per day year-on-year, well above pre-pandemic levels and supported by expected continued growth in mobility amid an ongoing rebound in the services sector,” OPEC economists wrote in their monthly market report for February.
Consumer demand cratered during the worst of the COVID-19 pandemic due to the tight social restrictions in place before the widespread introduction of vaccines. Crude oil prices actually traded in negative territory for a brief period in April 2020.
In the U.S. economy, demand remains below pre-pandemic levels. Data through the four-week period ending Feb. 3 show the total amount of refined petroleum products supplied to the market, a proxy for demand, averaged 20.1 million barrels per day, about 3% below the same period in 2020, before the pandemic hit the United States.
OPEC economists nevertheless revised their growth forecast higher for the United States, the world’s leading economy, from 0.8% previously to 1.2% for 2023.
OPEC’s demand forecast, however, rested largely on China, the Asian economies and the Middle East.
OPEC expects China’s economy to expand from 3% in 2022, a growth rate that came amid draconian social restrictions to control viral infections, to 5.2% for 2023. India’s economy grew by 6.8% last year but is forecast to slow to 5.6% for this year.
The global economy, meanwhile, is projected to expand by 2.6% this year, building on some of the momentum from last year. Inflation, however, is a lingering concern. In one of the largest upticks in recent months, the cost of living in the U.S. economy increased by 0.5% last month.
That could become a mounting concern should the price for global commodities increase this year on the back of tighter supplies. OPEC revised its forecast for global oil demand up by 100,000 barrels per day, a revision that followed Russia’s decision to trim 500,000 bpd from its own production starting next month.
Crude oil prices were actually down on the news due to a recent decision from the U.S. government to conduct a mandated sale of crude oil from the Strategic Petroleum Reserve.
OPEC cautioned that, as with any forecast, its was subject to many uncertainties.
“With this, risks to global economic growth remain skewed downward due to challenges including high inflation, monetary tightening by major central banks, high sovereign debt levels in many regions and some ongoing supply chain issues,” economists wrote. “Moreover, geopolitical risks and the pace of the COVID-19 pandemic during winter remain uncertain.”
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