With the recent revision in the demand projections for the International Energy Agency (IEA) and the Organization of Petroleum-Exporting Countries (OPEC) at the end of last week, oil consumers appeared to heave a collective sigh of relief.

However, experts say we aren’t out of the oil crisis yet. OPEC may change its mind depending on how events unfold over the next several weeks.

Changing trends

In its latest Oil Market Report released on Monday, April 18th, the IEA stated that the severity of current lockdown measures to prevent the spread of COVID-19 in China led to an adjustment in its expectations regarding global oil demand for the second quarter and the rest of the year. It also noted that member nations of the Organization for Economic Cooperation and Development used much less oil than expected, prompting the IEA to lower its demand outlook by 260,000 barrels per day (bpd.)

Another factor that may decrease fuel prices is a stable increase in crude production throughout Q1-2022 – a development spurred on by non-OPEC producers instead of OPEC member nations. But, as in all cases wherein an increase in production was put in motion by non-OPEC members, experts are keeping a wary eye on OPEC to see in which direction it moves.

Significant reductions

While OPEC has yet to respond to this upturn in crude production, the cartel has also revised its 2022 demand outlook and its figures are significantly lower than the IEA’s.

According to OPEC’s Monthly Oil Market Report, the demand for global oil is set to be lower by 480,000bpd. A slowdown in economic growth will drive this decrease due to China’s ongoing preventive lockdowns and the current conflict between Russia and Ukraine.

When Russia’s initial onslaught on Ukraine began, the IEA warned that western sanctions would lead to a potential loss of 3 million bpd worth of Russian crude exports. But now, the coordinated release of 240 million barrels, more than half of which will come from the US Strategic Petroleum Reserve (SPR), is expected to make up for the Russian shortfall.

A wary situation

But the IEA seems to think that the current shortfall of Russian crude is a temporary thing, prompting experts’ concerns that OPEC may just spring a surprise on IEA member nations working to keep benchmark prices within a reasonable range.

Indeed, earlier this month, OPEC secretary-general Mohammed Barkindo informed the European Union that the organization had no plans to help them if they completely cut off oil exports from Russia.

Barkindo stated that OPEC sees a potential loss of over 7 million bpd in Russian oil resulting from ongoing sanctions. It is improbable that Iranian crude will help make up the shortfall. Hence, it would be up to the United States and OPEC to fill the gap – but only if the latter chooses.

While oil companies in the US are already looking into ways by which they could increase production, OPEC hasn’t been so keen. OPEC member countries only pushed up production by 67,000bpd in March as several noted a decline in oil production.