Gazeta Riad | Travel, transportation, entertainment and hospitality are still enough to spend on suppressed demand

Travel, transportation, entertainment and hospitality are still enough to spend on suppressed demand

Demand for oil is expected to be at good levels in the second half of this year

The Organization of the Petroleum Exporting Countries (OPEC) has warned that the conflict in Ukraine and the ongoing pandemic pose a threat to the strong recovery of oil demand it expects in the second half of the year and global oil consumption is expected to increase by 3.1 million barrels per day at an average of 101.8 million barrels per day In the second half, exceeding pre-Covid levels, however, he warned that the recovery could be disrupted by inflationary pressures, virus outbreaks and the economic consequences of the Russian war in Ukraine.

And the group’s Vienna-based research department said in its monthly market: Current geopolitical developments and the uncertain spread of the epidemic at the end of the second half of the year still pose a significant risk to the expected pre-pandemic recovery. For this reason, the organization and its allies in OPEC + surprised traders earlier this month, it agreed to accelerate the return of production discontinued during the Covid crisis, and the organization’s own data suggest that global markets will tighten. significantly, unless the taps are switched on.

The report showed that an average of 29.65 million barrels per day from the group would be needed during the third quarter, however, the 13 OPEC member countries pumped 28.51 million barrels per day in May, with their output dropping by 176,000 barrels per day in the midst of a renewed rift in Libya.

However, most of the group’s countries, and their allies in the OPEC + alliance, are unable to further increase production as they struggle with investment shrinkage and cessation of operations, and free capacity is limited to key members. Persian Gulf, even theirs. unused supplies may be reduced due to losses caused by sanctions imposed on Russia.

OPEC said it expects demand for its crude oil to grow, forecast strong growth for the global economy in the coming months, and for the first time predicted that Russia’s output would fall from year to year, and in its monthly report closely followed the oil market, the producer bloc maintained its forecast for global demand. It remained stable at 100.29 million barrels per day for 2022 from its rating for May and has essentially returned to pre-pandemic levels, but lowered its rating for non-OPEC countries. to 65.74 million barrels per day, down from 230,000 barrels per day.

The revision is largely due to a decline in Russian liquid production, which is now estimated at 10.63 million barrels per day for 2022, 250,000 barrels per day less than a May forecast. Western countries on the occupation of Ukraine by Moscow.

As a result, and given an increase in LNG production by OPEC, the producer group now expects demand for its crude oil to average 29.15 million barrels per day per year, from 28.508 million barrels per day pumped in May . according to secondary sources ..

Demand for OPEC is calculated by subtracting liquids from outside OPEC and OPEC production of liquefied natural gas from total oil demand, and represents the amount of crude oil that the bloc must produce to achieve a balanced market which does not lead to any withdrawals or an increase in stocks. OPEC has worked steadily to hurt production over the past two years after collaborating with Russia and nine other allies on a series of production cuts aimed at rescuing the market from a spring 2020 crash due to a pandemic, but with the start of the season summer driving in the northern hemisphere and an expected recovery in demand By easing the constraints of blocking the epidemic, the production restrictions of the OPEC + alliance could put pressure on the market.

Platts valued Brent crude at $ 127.97 a barrel on June 13, the standard that hit a 14-year high of $ 137.64 a barrel in early March as Russian occupation of Ukraine escalated.

In its report, OPEC said the expected boost measures to increase could boost China’s crude oil imports, while India imported a record 5.1 million barrels a day in April after buying discounted Russian crude oil and OPEC said demand for oil is expected to be at good levels In the second half of this year, with increasing economic momentum, especially in the related services sector, which includes travel, transport, entertainment and hospitality, this activity of refurbished is expected to lead to the summer holiday season in the northern hemispheres, driven by savings still sufficient in developed economies to spend on suppressed demand.

The report showed that OPEC production in May fell by 239,000 barrels per day from April, with significant declines in Libya, Nigeria and Iraq, and Russian production is now expected to shrink by 170,000 barrels per day throughout the year, according to OPEC estimates.

The OPEC + Alliance agreed on June 2 to accelerate the growth of collective production to 648,000 barrels per day per month for July and August, after months of rejection of calls from the United States, India, Japan and other large consumers to soften prices. high, but with many members. Unable to increase production due to technical issues, sanctions or instability, only Saudi Arabia and the UAE can contribute in any significant way.

However, OPEC warned that once the expected summer boom in demand ends, high inflation could affect the global economy, along with any pandemic outbreak. “Since they still pose a significant risk to the expected recovery to pre-pandemic levels, inflationary pressures are likely to continue and it remains very uncertain when geopolitical issues can be resolved.”

The price of the OPEC basket with thirteen crude oil reached $ 119.24 per barrel on Thursday, June 16, compared to $ 121.07 the day before, according to calculations by the OPEC Secretariat. The OPEC reference basket for crude oil is from Sahara Blend (Algeria), Girasole (Angola), Djeno (Congo), Sapphire (Equatorial Guinea), Rabie Light (Gabon), Iran Heavy (Islamic Republic of Iran), Basra Light (Iraq), Kuwait exports (Kuwait), Es Sider (Libya), Pune Light (Nigeria), Arab Light (Saudi Arabia), Murban (United Arab Emirates) and Miri (Venezuela).

OPEC + has steadily reduced production over the past two years

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