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Home›OPEC›War in Ukraine threatens oil demand and investment, says OPEC

War in Ukraine threatens oil demand and investment, says OPEC

By Loriann Hicks
March 15, 2022
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Grant Smith 03/15/2022

(Bloomberg) – Russia’s invasion of Ukraine threatens to intensify a surge in global inflation, hurting oil demand and investment, the Organization of the Petroleum Exporting Countries has warned.


International crude prices briefly hit a 13-year high of nearly $140 a barrel last week as a boycott of Russian supplies widened the deficit in already tight global markets. Brent crude futures have since fallen almost 30%, but fears persist over the danger of a long-term export loss from Russia, which is part of the OPEC+ coalition.

“This conflict has so far led to a number of problems, including rising commodity prices, which are further aggravating global inflation,” OPEC said in its monthly report. “The effects of the conflict and especially the impact of rising inflation, if sustained, will lead to lower consumption and investment to varying degrees.”

Rising inflation is proving a major challenge to the global economy and causing a cost of living crisis in many countries as supplies of raw materials fail to keep pace with the post-pandemic recovery of the consumption – and are facing new constraints due to the war in Ukraine.

OPEC’s de facto leader Saudi Arabia has so far pushed back against US pressure to fill the vacuum left by Russia by turning on the taps, in part out of a reluctance to damage its political partnership with Moscow, and in part out of a belief that oil markets remain adequately supplied despite the turmoil. .

Yet as big oil companies desert Russia and international condemnation mounts, the pressure on OPEC+ members to pick a side could eventually become unstoppable.

The very acknowledgment of the war – even in cautious terms that avoided the word “invasion” – is an unusual step for the group’s monthly report, which generally avoids any controversy involving OPEC+ members. The 23-nation alliance will then meet on March 31.

The report confirms Riyadh’s view that OPEC is producing enough to maintain overall market balance. Its 13 members increased production by 440,000 barrels per day to 28.47 million per day in February, bringing the average for the year so far to 28.25 million per day, slightly above the average required this term.

If OPEC+ ratifies another modest supply increase again at its next meeting, that should further relieve the market, even if the alliance generally struggles to fully realize its planned increases.

The organisation’s research department, based in Vienna, maintained its estimates of global oil demand, predicting growth of 4.2 million barrels per day this year to an average of 100.9 million per day. He conceded that “this forecast is likely to change in the coming weeks when there is more clarity on the far-reaching impact of the geopolitical turmoil.”



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