Released September 14, 2022 | SUGAR LAND
en
Written by Daniel Graeber for Industrial Info Resources (Sugar Land, Texas)--The latest economic assessment from the Organization of the Petroleum Exporting Countries (OPEC) paints an optimistic forecast for the future, but the caveats to that assessment are decidedly bearish.
OPEC economists in their monthly report for September left their assessment for global economic growth unchanged from last month, pointing to a 3.1% uptick for both this year and for 2023.
Of the major global economies, India is expected to post the largest economic gains this year with 7.1%, followed by China, with 4.2% growth for this year. The forecast for China was revised lower though to reflect the strains of its zero-tolerance policy on COVID-19.
For the United States, growth is forecast at 1.8% for this year, unchanged from the previous forecast. And it's somewhat surprising that OPEC expects the eurozone to outperform the United States, the world's biggest economy, with 3.1% growth for 2022.
"The global growth level has been well supported by consumption, which has shown a solid trend especially in advanced economies," OPEC economists wrote.
High levels of inflation are stifling growth in the global economy and much of that increase in prices can be attributed to energy. But those prices are starting to moderate as it becomes clear the supply-side squeeze that was expected from the Russian war on Ukraine is not as bad as initially feared.
Supply-side growth for 2022 was unchanged for OPEC economists at 2.1 million barrels per day (BBL/d). Much of that support comes from the United States. Demand, meanwhile, came in at "a healthy level" of 3.1 million BBL/d. OPEC said much of the drive in oil demand growth is attributed to the switch away from high-priced natural gas to oil in power generation, echoing recent sentiment from the U.S. Energy Department.
The crude oil market, however, wasn't sure what to make of OPEC's report when it was released Tuesday morning. West Texas Intermediate, the U.S. benchmark for the price of oil, was in rally mode when it came out, but retraced its steps following the release of U.S. inflationary data.
The U.S. Labor Department reported the Consumer Price Index increased 0.1% in August and came in at 8.3% over the latest 12-month period. That's something of a slowdown in terms of the rate of increase month-on-month, but in no way should that 8.3% be seen as a good thing.
The U.S. Labor Department attributed the weakening to a 10.6% decline in the gasoline component of its inflationary data. But that was largely offset by increases in shelter, food and medical care. It's cheaper to dine out than it is to buy groceries to cook at home. And while gasoline is cheaper, natural gas utility bills are some 33% higher than last year.
The situation is even worse in Europe, where consumers are paying the equivalent of $325 per barrel for natural gas. One contact told IIR that natural gas prices are so expensive that firewood in the northern European market is already sold out as consumers brace for a winter without Russian natural gas.
Click on the image at right for a look at European gas prices compared with Brent crude oil.
With those pressures, it's hard to embrace what seems to be an optimistic outlook from OPEC economists. Energy issues in the eurozone are already prompting extraordinary measures, such as shutting lights off early at the Eiffel Tower in Paris to conserve energy. And it's widely expected that U.S. policymakers will raise interest rates again to throttle inflation even further. The European Central Bank already upped its interest rates and a global recession may be here already.
Meanwhile, Morgan Stanley joined Swiss investment bank UBS in lowering its forecast for the price of oil, citing what it said was a slowdown in demand. That goes against the "healthy level" outlined in OPEC's monthly market report.
Most analysts hinted that OPEC's market report was a bit exaggerated in its optimism. And indeed it may be a matter of perception. Beyond the numbers and OPEC's basis of cheer seemed to be centered on one thing--consumption. Its own caveats--geopolitical tensions, the pandemic, supply-chain issues, rising inflation--are numerous and should prompt a careful assessment of the report.
Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking over 200,000 current and future projects worth $17.8 trillion (USD).
OPEC economists in their monthly report for September left their assessment for global economic growth unchanged from last month, pointing to a 3.1% uptick for both this year and for 2023.
Of the major global economies, India is expected to post the largest economic gains this year with 7.1%, followed by China, with 4.2% growth for this year. The forecast for China was revised lower though to reflect the strains of its zero-tolerance policy on COVID-19.
For the United States, growth is forecast at 1.8% for this year, unchanged from the previous forecast. And it's somewhat surprising that OPEC expects the eurozone to outperform the United States, the world's biggest economy, with 3.1% growth for 2022.
"The global growth level has been well supported by consumption, which has shown a solid trend especially in advanced economies," OPEC economists wrote.
High levels of inflation are stifling growth in the global economy and much of that increase in prices can be attributed to energy. But those prices are starting to moderate as it becomes clear the supply-side squeeze that was expected from the Russian war on Ukraine is not as bad as initially feared.
Supply-side growth for 2022 was unchanged for OPEC economists at 2.1 million barrels per day (BBL/d). Much of that support comes from the United States. Demand, meanwhile, came in at "a healthy level" of 3.1 million BBL/d. OPEC said much of the drive in oil demand growth is attributed to the switch away from high-priced natural gas to oil in power generation, echoing recent sentiment from the U.S. Energy Department.
The crude oil market, however, wasn't sure what to make of OPEC's report when it was released Tuesday morning. West Texas Intermediate, the U.S. benchmark for the price of oil, was in rally mode when it came out, but retraced its steps following the release of U.S. inflationary data.
The U.S. Labor Department reported the Consumer Price Index increased 0.1% in August and came in at 8.3% over the latest 12-month period. That's something of a slowdown in terms of the rate of increase month-on-month, but in no way should that 8.3% be seen as a good thing.
The U.S. Labor Department attributed the weakening to a 10.6% decline in the gasoline component of its inflationary data. But that was largely offset by increases in shelter, food and medical care. It's cheaper to dine out than it is to buy groceries to cook at home. And while gasoline is cheaper, natural gas utility bills are some 33% higher than last year.
The situation is even worse in Europe, where consumers are paying the equivalent of $325 per barrel for natural gas. One contact told IIR that natural gas prices are so expensive that firewood in the northern European market is already sold out as consumers brace for a winter without Russian natural gas.
Click on the image at right for a look at European gas prices compared with Brent crude oil.With those pressures, it's hard to embrace what seems to be an optimistic outlook from OPEC economists. Energy issues in the eurozone are already prompting extraordinary measures, such as shutting lights off early at the Eiffel Tower in Paris to conserve energy. And it's widely expected that U.S. policymakers will raise interest rates again to throttle inflation even further. The European Central Bank already upped its interest rates and a global recession may be here already.
Meanwhile, Morgan Stanley joined Swiss investment bank UBS in lowering its forecast for the price of oil, citing what it said was a slowdown in demand. That goes against the "healthy level" outlined in OPEC's monthly market report.
Most analysts hinted that OPEC's market report was a bit exaggerated in its optimism. And indeed it may be a matter of perception. Beyond the numbers and OPEC's basis of cheer seemed to be centered on one thing--consumption. Its own caveats--geopolitical tensions, the pandemic, supply-chain issues, rising inflation--are numerous and should prompt a careful assessment of the report.
Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking over 200,000 current and future projects worth $17.8 trillion (USD).
