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Will oil demand continue to grow and why

17 July 2021

Salikhov Marcel R. President, Principal Director on Economic Studies, Head of the Economic Department

Marcel Salikhov, Director of the Center for Economic Expertise, National Research University Higher School of Economics, commented to Izvestia on OPEC's forecast for oil demand growth in 2022.

The demand for oil produced by OPEC countries in 2022 is expected to be 4% more than in 2021, or will reach 28.7 million barrels per day. Such data are given in the July report of the organization's experts. At the same time, in 2021, demand increased by as much as 5 million barrels per day compared to 2020.

“In our opinion, the OPEC forecast is quite relevant to the current market situation. Over the past few months, OPEC has raised its estimate of its 2021 demand forecast. The forecast for 2022 is also based on rather optimistic assumptions for economic growth (+ 4.1% of world GDP growth in 2022) and the continuation of a fairly strong growth in oil demand (+3.3 million barrels per day of world demand growth). In general, this correlates with our current forecasts for oil demand,” Marcel Salikhov, Director of the Center for Economic Expertise at the Higher School of Economics, said to Izvestia.

According to him, in 2022, the recovery growth in oil demand will continue to a large extent. The demand will reach the 2019 level just next year.

“OPEC forecasts traditionally do not contain price predictions, although this is the most important parameter for oil exporting countries. We believe that in 2021 one can expect that there will be an increase in oil prices, and prices in the second half of the year will reach $ 85 per barrel, and the average annual price level will be $ 70-71 per barrel for Brent,” Marcel Salikhov told.

However, he said prices will decline in 2022. “The main factor will be the growth in supply from large manufacturers. Reaching a deal with Iran and lifting sanctions against that country could increase the supply by 1-1.2 million barrels per day. The current high level will stimulate a sharp increase in drilling activity in the United States, which will just affect production figures next year. A strong increase in supply amid a slowdown in demand growth will lead to a decrease in prices,” the expert noted.

“After 2022, we can expect a serious slowdown in global oil demand growth. Global trends in decarbonization limit the possibilities for maintaining long-term strong growth in world oil demand,” Marcel Salikhov concluded.

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