The global economy continued its recovery path throughout much of 2022, albeit at varying levels among regions, and with a notable slowdown towards the end of the year. The Eurozone saw unexpectedly strong growth in 1H22 before decelerating in 2H22, amid rising inflation that prompted European Central Bank monetary tightening and concerns about a possible energy crunch in the winter heating season. The US economy faced challenges in 1H22, but recovered somewhat in 2H22, supported by ongoing healthy consumption levels. In the non-OECD, China’s strict zero-COVID policy has dampened GDP growth in 2022. India witnessed strong economic growth in 1H22, but decelerated slightly in 3Q22 amid high inflation levels. For 2022, world GDP growth is estimated at 2.8%. Going forward, several challenges still lie ahead. For example, persistently high inflation may necessitate further monetary tightening measures by major central banks. Rising interest rates will be a cause for concern for countries with high sovereign debt levels. Tight labour markets, amid calls for higher wages, will add pressure, as will continued supply chain issues. However, a resolution of the geopolitical conflict in Eastern Europe and a relaxation of China’s zero-COVID policy could provide some upside potential. Global GDP growth for 2023 is forecast at 2.5%.
Global oil demand growth is estimated at 2.5 mb/d y-o-y in 2022. In OECD Americas and Europe, lowerthan-expected transportation fuel demand outpaced jet fuel demand recovery, leading to y-o-y growth of 1.4 mb/d for the OECD. In the non-OECD, y-o-y growth of 1.2 mb/d is expected. Renewed lockdowns in China weighed heavily on oil demand, with the country registering an oil demand contraction in 2022. For 2023, world oil demand is expected to increase by 2.2 mb/d y-o-y.
OECD oil demand is forecast to increase by 0.3 mb/d. This is mostly in OECD Americas, while other OECD regions are not expected to see noticeable growth. In the non-OECD, oil demand is forecast to increase by 1.9 mb/d, with China and India seeing the largest growth. This forecast assumes the successful containment of COVID-19 and a resumption of pre-pandemic economic growth in China, while India’s oil demand is projected to be supported by continued healthy economic growth.
Non-OPEC supply growth in 2022 is estimated at 1.9 mb/d. The main drivers of growth are estimated to have been the US, Canada, Guyana, Russia, China and Brazil. US shale oil companies continued to focus on shareholder returns, with higher production costs amid supply chain shortages and inflation limiting overall production growth. In 2023, non-OPEC supply is forecast to expand by 1.5 mb/d y-o-y. US tight oil output and offshore startups in Latin America and the North Sea are expected to drive growth.
The US is expected to lead the way with a share of about 75% of total growth, followed by Norway, Brazil, Canada, Kazakhstan and Guyana. Non-OPEC upstream sector investment in 2022 is estimated at around $424 billion, up around 19% y-o-y. It is forecast at $459 billion in 2023, up by 8% y-o-y. As the year 2022 draws to a close, the recent global economic growth slowdown with all its far-reaching implications is becoming quite evident. The year 2023 is expected to remain surrounded by many uncertainties, mandating vigilance and caution. This is reflected in the continued pro-active and pre-emptive joint efforts of the DoC to provide stability and balance to the global oil market, amid rapidly evolving market conditions.
Source: OPEC