OPEC raises global oil demand forecast for the first quarter of 2022

Through Grant smith to 12/13/2021

LONDON (Bloomberg) – OPEC has significantly increased its forecast for global first-quarter oil demand as part of this year’s recovery is delayed by Omicron, but the overall risk of the new virus strain remains limited.

The Organization of the Petroleum Exporting Countries increased consumption estimates over the period by 1.1 million barrels per day – equivalent to the annual growth in world consumption in a typical year before the pandemic – according to a monthly report from the group’s research department.

“The impact of the new Omicron variant is expected to be light and short-lived as the world becomes better equipped to deal with Covid-19 and its related challenges,” the report said.

The overhaul means OPEC and its allies won’t create such a large surplus when they make plans to continue boosting oil production in January. The decision to add barrels, taken earlier this month, surprised traders as markets remain very fragile. This has been widely interpreted as a gesture of political goodwill from Saudi Arabia to the United States.

Oil prices have largely held up, however, with crude trading near $ 75 a barrel in London as early signs show demand has yet to suffer from the latest virus outbreak. OPEC’s decision to technically keep its meeting in session – leaving the door open to reverse the increase in supply in the short term if necessary – also heightens sentiment.

The demand outlook adjustments in Monday’s report resemble those made by an OPEC + advisory committee that met the day before the ministers’ decision.

The increase in demand for the report in the first quarter is offset by downgrades in the second and third quarters. As a result, the annual forecast for demand growth of 4.2 million barrels per day in 2022 has not changed.

Even with the change, OPEC + is likely to cause further oversupply in early 2022 if it continues to restore production interrupted during the pandemic.

The group estimates that it will need to supply an average of 27.89 million barrels per day during the first quarter, although the report shows that the production of its 13 members was 27.7 million in November. Supply increases expected this month and next will leave the group’s output high enough for global stocks to rise again.

However, officials within the organization said they were comfortable with the result, as the group’s restriction on supply ran out of supplies. Inventories in developed countries were 207 million barrels below their five-year average in October, according to the report.

Steve R. Hansen