Alex Lawler

LONDON, (Reuters) -OPEC stated Tuesday that Russia’s invasion in Ukraine poses a challenge to oil demand for 2022. Rising inflation and higher crude prices are also contributing factors. This increases the possibility of OPEC’s forecast of a weaker demand for this year.

As a result of Western sanctions on Moscow’s invasion in Ukraine, oil prices rose to $139 per barrel. This helped fuel an already high inflation rate.

The Organization of the Petroleum Exporting Countries, (OPEC), maintained its belief that the world’s oil demand will rise by 4.15 Million barrels per daily (bpd) by 2022. It also increased its projection of the global demand for crude in a monthly report.

OPEC however, who just a month before had suggested the possibility for a faster demand rise in 2022, stated that the conflict in Ukraine, and ongoing concerns over COVID-19, would have a short-term negative impact on global economic growth.

“Looking ahead, challenges to the global economy – especially regarding the slowdown of economic growth, rising inflation and the ongoing geopolitical turmoil will impact oil demand in various regions,” OPEC said in the report.

In its comment on the global economy, OPEC stated that “While the year began on a relatively solid underlying basis”, but the recent events in Eastern Europe could derail it.

According to OPEC’s prediction last month, the world oil consumption will surpass 100 million bpd in the third quarter. OPEC raised its prediction of oil demand for this year by around 100,000 bpd and now anticipates that it will reach 100.90million bpd.

OPEC reported that in 2019, the world used over 100 million barrels of oil per year.

After the publication of the report, oil prices fell further and traded below $99 per barrel due to the perception that there are fewer supply risk.

RISES OUTPUT

The report showed a higher level of output by OPEC due to the fact that the group and allied members, called OPEC+ unwinding record output reductions in 2020, is also evident.

OPEC+ aims at increasing output by 400,000 bpd a monthly, about 254,000 bpd coming from the 10 participating OPEC countries. But, as producers find it difficult to pump more, some have seen production decline.

Nevertheless, the report revealed that OPEC’s February output ebbed against this trend. This was due to a stronger supply from Saudi Arabia (the top exporter) and a rebound from Libyan outages.

As was the forecast growth for total non-OPEC oil supply in 2022, it was unchanged.

OPEC stated that the world will need 29 million bpd of its members by 2022. This is an increase of 100,000 bpd over last month, theoretically allowing for further growth in production.