OPEC economists left many economic estimates unchanged from the previous report in their monthly market report, although concerns were raised about inflation and higher borrowing rates. File photo by Mohamed Messara/EPA-EFE.
The International Monetary Fund said this week that it clearly sees clouds on the economic horizon. Photo by Bonnie Cash/UPI
OPEC will cut production by 1.6 million barrels per day in May, sparking some supply-side fears for the second half of the year. File photo by John Angelillo/UPI
April 13 (UPI) — Economic growth should continue through the middle of the year and support demand for crude oil, although inflation and high interest rates could dampen sentiment, economists from the Organization of the Petroleum Exporting Countries said Thursday.
In their monthly market report for April, OPEC economists said momentum should continue through the remaining months to June, although “the global economy will continue to navigate challenges such as high inflation, higher interest rates, particularly in the eurozone and the United States, and high debt levels in many regions.”
Inflationary pressures are easing in most major economies, although they remain high relative to the target rates set by global central banks. However, the International Monetary Fund said the outlook for the global economy was poor, with growth expected to reach 3% over the next five years, the lowest forecast since 1990.
However, OPEC economists left many of their growth forecasts unchanged from last month’s report. The US economy is expected to grow 1.2% this year, while Europe will slide from a growth rate of 3.5% last year to 0.8% in 2023.
China, meanwhile, is growing from 3% last year to 5.2% this year, reflecting the recovery from severe social restrictions introduced during the COVID-19 pandemic. China, the world’s second-largest economy after the United States, is expected to account for the majority of global oil demand.
Europe is likely to face challenges, OPEC economists said, as the economy cools, though that should only lead to a slight drop in oil demand.
In the US economy, increased travel during the summer is supporting demand, although OPEC economists seemed concerned about the balancing act at the Federal Reserve, which is trying to control inflation without triggering a recession.
“Any weakening of the economy due to continued monetary tightening by the US Fed may offset some of these seasonal dynamics,” the report said.
However, OPEC said the forecast for oil demand from the 13 core members remains unchanged this year at 29.3 million barrels per day, although that is 800,000 bpd more than last year.
OPEC will cut production by 1.6 million barrels per day in May, sparking some supply-side fears for the second half of the year. Outside the producer group, Brazil, Canada, Guyana, Kazakhstan, Norway and the United States do the heavy lifting.
“Major uncertainties remain about the impact of projected U.S. shale output in 2023,” the economists wrote.
The US Energy Information Administration, part of the Energy Department, notes that US oil production will continue to break records. With an estimated 12.5 million bpd in January, the last full month for which data is provided, the United States leads the world in crude oil production.