Soaring energy prices are likely to crimp demand for oil in some of the world’s fastest-growing economies this year, the Organization of the Petroleum Exporting Countries said Thursday.
In a closely watched monthly market report, OPEC said global demand for oil would grow by 5.7 million barrels a day this year, 160,000 barrels a day less than it expected last month. The revision means the oil-producers group now expects demand for oil in 2021 to total 96.4 million barrels a day.
Soaring fuel costs amid a global energy crunch were showing signs of weighing on demand. Weaker than expected demand for oil in China and India was now likely, OPEC said. In China, fresh outbreaks of Covid-19 cases and lockdowns, coupled with weaker factory activity and power outages have also reduced demand for fuels.
Demand for the remainder of the year, particularly in the poorer nations that aren’t members of the Organization for Economic Cooperation and Development, is also likely to be slower because of higher energy costs, OPEC said.
In Europe, low stockpiles of natural gas and limited supplies ahead of the winter months have sent the continent’s natural gas prices surging to record levels. That has led some industries facing high energy bills to cut back on output.
High coal and gas prices have led to power cuts in China, while Beijing has encouraged factories to reduce output to ease the strain on its power grid.
Weaker demand for oil could ease pressure on the cartel, which has come under fire because of its constrained output. U.S President Joe Biden has rebuked the group for not doing more to help alleviate the global energy crunch.
OPEC last month stuck to plans to increase oil output in measured increments, despite pressure to raise production at a faster clip.
Meanwhile, OPEC said Thursday supply from oil producers that aren’t part of its cartel should grow by 700,000 barrels a day this year, and by 3 million barrels a day next year.
Despite the negative effect of higher energy costs, the cartel doesn’t expect weaker global economic growth. It left its forecast for economic growth this year and next unchanged at 5.6% and 4.2%, respectively.