The military conflict in Ukraine has already become a major cause of economic uncertainty in the world, relegating the pandemic to the background. It has accelerated global inflation and disrupted commodity chains, and will eventually lead to a reduction in oil consumption and investment in the sector. This conclusion follows from the March OPEC report.
"The consequences of this military conflict, given its impact on rising inflation, will lead to lower oil consumption and less investment in the sector," the report concluded. OPEC believes that the military operation in Ukraine "will obviously affect the economic situation in the world, but it is not yet completely clear to what extent." Experts believe that data from the coming weeks will provide more information to "assess the far-reaching consequences" of this military operation.
Forecast
OPEC maintained its forecast for global oil demand growth of 4.2 million bpd in 2022, but expects to revise the forecast amid geopolitical turmoil, the organization said in a report.
"The forecast may change in the coming weeks when there is more clarity on the far-reaching effects of geopolitical turmoil," OPEC said.
The supply forecast from non-OPEC countries is also waiting to be revised because of the military conflict in Ukraine. "This forecast is under assessment and will be reviewed and adjusted in the coming weeks if necessary," the organization said. The previous forecast for oil supply growth from "non-OPEC" countries in 2022 was 3 million bpd year-over-year. The US, Russia, Canada, Brazil and Kazakhstan were expected to be the main growth drivers.
Production
OPEC countries increased oil production by 440,000 barrels per day (bpd) to 28.47 million bpd in February 2022, according to the report.
The countries of the Vienna agreement, also known as the OPEC+ alliance, have been reducing oil production since May 2020, but since the beginning of 2021, they have gradually restored it. So, from August last year, they can increase production by 400 thousand b / s per month, such a plan is valid until April this year inclusive. However, it is not always possible to restore the production at the desired pace. For example, 10 OPEC countries taking part in the agreement account for 254,000 bpd of this quota. In February they were able to increase production by 270,000 bpd to 24.14 mln bpd, whereas in January they only managed to recover production by 137,000 bpd to 23.9 mln bpd.
According to the report, February oil production in Saudi Arabia (OPEC's largest oil producer) was 10.19 mln bpd (up 141k bpd over January) instead of the planned 10.227 mln bpd. Iraq increased oil production by 36 thousand bpd to 4.27 million bpd, while the scheduled 4.325 million bpd. Kuwait also increased its production by 32 thousand bps up to 2.61 million bps and UAE - by 26 thousand bps up to 2.95 million bps. At that, the conditions of the deal on reduction of oil production in February were fulfilled to 136% of the plan against 135% a month earlier.
GSV "Russia - Islamic world"
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Based on materials from TASS