Opec thinks global oil demand growth will slow by 2023

World oil demand growth will slow in 2023 as soaring crude and fuel prices help drive up inflation and drag on the global economy, according to Opec delegates and industry sources.

Fuel use has bounced back from the 2020 epidemic-induced recession and is set to surpass 2019 levels this year even as prices hit record highs.  But high prices have already affected growth forecasts for 2022 and exacerbated expectations of slower growth in 2023.  

Opec is expected to release its first demand forecast for 2023 in July.  The forecasts from the group, as well as the Paris-based IEA, will be closely watched for guidance on how Opec supply policy will evolve.  

An Opec delegate and another source familiar with Opec's thinking said they expect global demand growth of no more than 2 million b/d in 2023, a rise of just 2 percent, compared with a projected 3.36 million b/d in 2022.  

Referring to the outlook for next year, the representative said that even at 1 million b/d, that would still be growth, not a peak.  

Opec is expected to release its first demand forecast for 2023 in its monthly report on July 12, an Opec source said.  

The IEA, which advises Western governments on energy policy, will give its first demand forecast for 2023 in its monthly report on Wednesday, an IEA spokesman said.  

Opec is watching for signs that high prices will lead to demand destruction.  

Two other Opec delegates said the drop in demand could have an impact on oil use in coming months, though one said there was no sign of that in the United States, citing recent gasoline demand data.  

A senior industry source at a trading firm not affiliated with the IEA or Opec also said he expected demand growth to decline somewhat in 2023, adding that his initial estimates suggest demand growth will fall to 2 million b/d or less from 2.6 million b/d in 2022.  He said crude prices of $120 a barrel were destroying demand.  This is already happening.  Oil demand forecasters often have to make considerable revisions to account for changes in the economic outlook and geopolitical uncertainty.  

Opec's first forecast, released in July 2021, had projected demand growth of 3.28 million b/d in 2022. It was later revised upwards to more than 4 million b/d and then lowered to 3.36 million b/d.