“A slowdown in the pace of recovery in the fourth quarter of 2021 is now assumed due to elevated energy prices,” OPEC wrote in its closely-watched monthly forecast, released on Nov. 11.
The consortium said it expects oil demand to average 99.49 million barrels per day (bpd) in the fourth quarter of 2021, down 330,000 bpd from the prior month’s forecast.
“While the global economic recovery has continued, most recently, the combination of rising COVID-19 infections, supply chain issues, and growing inflation has led to a slight slowdown that is forecast to materialize in” the fourth quarter of 2021, OPEC said.
The cartel also lowered its world oil demand for all of 2021 by around 200,000 bpd.
Crude oil prices were little changed at around $83 a barrel after the report was released, following sharp falls a day earlier, driven by concerns about inflation in the United States. A Nov. 10 report from the Bureau of Labor Statistics showed that inflation accelerated by 0.9 percent in October, up from a 0.4 percent pace in September, while recording the fastest over-the-year pace of price growth in nearly 31 years, at 6.2 percent.
Surging energy costs were a major factor pushing up inflation in the United States, with energy prices up 4.8 percent over the month in October and 30.0 percent over the year. The sharpest rise was in fuel oil, which spiked 12.3 percent over the month and 59.1 percent over the year in October.
Inflation has emerged as a key theme of the post-pandemic economic recovery, rising faster than wages and eroding the purchasing power of Americans. While average hourly earnings rose 4.9 percent in the year through October, the Labor Department said in a Nov. 10 release (pdf), the higher 6.2-percent pace of over-the-year consumer price inflation means that wages actually contracted by over 1.2 percent in real terms.
OPEC’s oil demand forecast comes days after the cartel rebuffed calls from the Biden administration, and others, to ramp up crude production more sharply to help ease prices at the pump. At a Nov. 4 meeting, the consortium and its crude-producing allies, known as OPEC-plus, voted to gradually raise crude production by 400,000 barrels per day each month.
Facing blowback over rising gasoline prices, the Biden administration has been pressuring OPEC+ to expand production, with a spokesperson for the White House’s National Security Council accusing the cartel of being “unwilling” to use its power to assist in the global economic recovery.
“Our view is that the global recovery should not be imperiled by a mismatch between supply and demand,” the spokesperson said.
“OPEC-plus seems unwilling to use the capacity and power it has now at this critical moment of global recovery for countries around the world.”
Some market analysts think that U.S. energy policy is more to blame for skyrocketing prices than OPEC’s refusal to pump more crude.
“[U.S. President Joe] Biden believes that if he tells OPEC to jump, they should ask how high. His energy policy is, in reality, a hot mess with mixed signals about wanting lower energy prices for U.S. consumers but at the same time he is doing everything he can to raise prices,” Phil Flynn, senior market analyst at The PRICE Futures Group, wrote in his latest edition of “The Energy Report.”
The next OPEC+ meeting is scheduled for Dec. 2.
Andrew Moran contributed to this report.