Oil demand to strengthen following Omicron’s “light and short-lived” impact
Raw oil supplies may be a bit tighter than expected with OPEC and its associates (OPEC +) expecting strong demand in 2022.
According to Bloomberg, OPEC + internal research indicated that the surplus in the first quarter of 2022 is expected to be 1.4 million barrels per day, about 25% lower than expected in early December.
OPEC + also noted in its monthly oil market report in mid-December that the impact of the Omicron COVID variant would be “mild and short-lived.”
However, it is not just about oil demand, with fears that Russian oil supplies are approaching their limit.
Russia produced 10.9 million barrels of oil per day in December, essentially unchanged from its November production and about 37,000 bpd below the OPEC + quota.
The world’s third-largest oil producer (in 2020) is also not expected to meet its target of returning to pre-pandemic oil production levels by May of this year, with Fitch Ratings saying it would not be reached until after the pandemic. late summer in the Northern Hemisphere.
Oil still hasn’t hit previous highs
Despite this, oil is still trading below US $ 80 per barrel, with benchmark Brent crude currently at US $ 78.91 / bbl.
This comes as the expected continued high demand is offset by expectations that OPEC + will stick to its plans to increase production in February by 400,000 bpd.
That will leave the oil consortium with around 3.4 million bpd of cuts to unwind by the end of September this year, in accordance with its July 2021 agreement.
OPEC + had cut production by 5.8 million barrels to cope with the sharp drop in oil demand caused by travel restrictions and lockdowns linked to COVID.
This drop in demand has also impacted oil and gas investments, which has raised concerns about the ability of oil suppliers to meet future demand.
Meanwhile, crude oil prices had risen 59% in 2021 due to the economic recovery from the pandemic, weather disruptions and increased demand resulting from gas shortages in Europe.