The Organization of the Petroleum Exporting Countries (OPEC) on Tuesday credited the US and European Union (EU) for better-than-expected economic growth in 2022, while warning that such progress could slow this year.

Growth dynamics in both the US and the eurozone played a key role in raising last year’s estimate of global economic growth to 3 percent, the Vienna-based group said in its monthly oil market report.

These positive trends, along with economic support measures in China and “healthy momentum” in India, should help maintain “good levels of growth” in 2023, according to the report.

Nevertheless, the report projected growth to remain as expected at around 2.5 percent in 2023, as opposed to the 3 percent achieved in 2022.

“While growth momentum is expected to continue into 2023, the global economy will continue to navigate many challenges,” the report said.

Challenges cited include high inflation, monetary tightening by major central banks and high government debt in many regions.

“In addition, geopolitical and COVID-19-related risks and uncertainties may contribute to downside risk in a few selected economies,” the report said.

For the US, economic growth estimates for 2022 were revised from 1.7 percent last month to 2 percent and from 0.8 percent to 1 percent for 2023.

Estimates for the economic growth of the euro zone for 2022 rose from 3 percent to 3.2 percent and from 0.1 percent to 0.4 percent for 2023.

The Federal Reserve raised interest rates early last year and continued to do so until the end of the year. This also led to an appreciation of the US dollar and an increase in the oil price.

Meanwhile, the rise in US interest rates separately increased the cost of capital, reducing investors’ “hunger” for oil, the OPEC report said.

According to the report, the US is expected to be one of the main drivers of liquid oil supply growth outside OPEC along with Norway, Brazil, Canada, Kazakhstan and Guyana by 2023. It predicted declines in supply growth for both Russia and Mexico.

While Russia managed to withstand external pressures on its economy at the start of the war in Ukraine, the OPEC report predicted “a continuation of the downturn towards the end of 2022” in the coming year due to sanctions.

Sanctions include an EU price cap on Russian oil and restrictions on the purchase, importation or maritime transport of the resource – which will soon be expanded to include other refined petroleum products.

OPEC’s monthly report also took a deep look at the economic growth potential and the changes that emerging market economies, such as India and China, are experiencing.

In India, that growth was revised from 6.5 to 6.8 percent for 2022, but remained at 5.6 percent for 2023.

China’s growth estimates remained unchanged at 3.1 percent for 2022 and 4.8 percent for 2023, despite Beijing’s recent decision to reopen the country, the report said.

The Chinese economy faced significant challenges in 2022 due to COVID-19 policies and ongoing problems in the real estate and construction markets – which OPEC cited as reasons for a sharp fall in oil demand.

China’s easing of zero-COVID-19 policies and other fiscal measures are expected to help bolster economic growth in 2023 and increase consumption.

According to the report, oil futures prices already recovered somewhat in the second half of December on improving market sentiment around the easing of restrictions in China.

This turnaround has “created optimism for a recovery in oil demand,” it said.

Nevertheless, the OPEC report remained cautious about China’s potential growth in the coming months, stressing that recent moves “could also have a negative impact”.

“An overly loose COVID-19 policy could lead to an overload of China’s health system amid rising infections,” it stated. “Too much support for the real estate sector could again lead to an overheated and highly indebted real estate sector, leading to further insolvencies.”

Responding to the report’s projections, climate economist Gernot Wagner of Columbia Business School warned that “estimating oil demand is notoriously difficult.”

“Yes, China’s reopening should increase demand,” he told The Hill in an email. “But the Russian oil price cap seems to be working better than expected. Meanwhile, there is the global recession gambling game.”

Morgan Bazilian, a professor of public policy at the Colorado School of Mines, echoed these sentiments, emphasizing in an email that “projections are always wrong.”

“What happens in China this year on the demand side will make a big difference one way or another,” said Bazilian, who previously worked as an energy specialist at the World Bank.

Bazilian described OPEC – mainly Saudi Arabia – as “clearly in charge of global markets as US growth slows”

“The projections and prices don’t seem to be moving the needle in the US as much as one would expect based on history,” he added.

A broader lesson, according to Wagner, is the idea that oil is likely to “stay for a while,” despite moves by the EU, California and elsewhere to effectively ban internal combustion engines by 2035.

“The world is far from done explaining anything close to the success of the oil transition,” Wagner said.