RIYADH: The Organization of Petroleum Exporting Countries has cut its oil demand forecast for 2022 and 2023 due to a possible economic slowdown. 

In its monthly report, OPEC projected that oil demand will increase by 2.64 million barrels per day, or by 2.7 percent in 2022, down 460,000 bpd from the previous forecast. 

In 2023, OPEC expects oil demand to rise by 2.34 million bpd, down 360,000 bpd from previously forecast.

The OPEC report also added that Saudi Arabia’s strong Purchasing Managers’ Index in recent months is proof of the Kingdom’s continued growth in the non-oil sector. 

“The recent liberalization of visa rules for regional and international travelers and a new tourism law (in Saudi Arabia) might intensify growth in the non-oil private sector considering that tourism is a major source of jobs and GDP growth,” said OPEC in its report. 

OPEC also revised the global economic growth forecast in 2022 down to 2.7 percent, 0.4 percent lower than its previous estimate.

It also cut the growth forecast for 2023 to 2.5 percent, down 0.6 percent from an earlier projection. 

In 2022, OPEC ramped up production to compensate for record cuts due to the pandemic outbreak in 2020 and 2021. 

According to the report, OPEC output rose by 146,000 bpd to 29.77 million bpd in September, led by Saudi Arabia and Nigeria.

“The world economy has entered into a time of heightened uncertainty and rising challenges, amid ongoing high inflation levels, monetary tightening by major central banks, high sovereign debt levels in many regions as well as ongoing supply issues,” said OPEC in the report. 

The report added: “Moreover, geopolitical risks remain, and the course of the pandemic in the northern hemisphere during the winter season remains to be seen.” 

On the positive side, the report noted that global economic conditions could be improved if geopolitical tensions in Eastern Europe get eased, ultimately resulting in lower inflation and less hawkish monetary policies. 

According to OPEC, solid increases in US oil and gas rig counts and high fracking activity will support production going forward, but factors like inflationary pressures, supply chain issues and shortages of material and labor may pose challenges in the coming months.