OPEC bullish on oil demand in 2022, says Omicron impact will be mild | Investment News
LONDON (Reuters) – OPEC on Monday raised its global oil demand forecast for the first quarter of 2022 and stuck to its timetable for a return to pre-pandemic oil use levels, saying that the Omicron coronavirus variant would have a mild and brief impact.
The bullish view from the Organization of the Petroleum Exporting Countries comes as oil prices have recovered some of the decline seen when the variant emerged last month. Yet the World Health Organization says Omicron poses a “very high” global risk.
In a monthly report, OPEC said it expects global oil demand to average 99.13 million barrels per day (bpd) in the first quarter of 2022, up 1.11 million. of bpd compared to its forecast of last month.
“Part of the recovery previously expected in the fourth quarter of 2021 has been postponed to the first quarter of 2022, followed by a more steady recovery throughout the second half of 2022,” OPEC said in the report.
“Additionally, the impact of the new Omicron variant is expected to be mild and short-lived as the world becomes better equipped to handle COVID-19 and its related challenges.”
Oil fell 10% on Nov. 26 when news of the new variant surfaced as traders feared another hit to demand. But OPEC and its allies decided on December 2 to stick with a production increase planned for January, a gamble that seems to have paid off as prices are stabilizing.
In the report, OPEC maintained its forecast that global oil demand will increase by 4.15 million bpd in 2022. This year’s growth forecast also remained unchanged.
Global consumption is expected to surpass the 100 million bpd mark in the third quarter of 2022, in line with last month’s forecast. On an annual basis according to OPEC, the world last used more than 100 million bpd of oil in 2019.
Oil pared an earlier decline after the report was released and was trading near $75 a barrel, from a decline below $66 on Dec. 2.
The report also showed higher output from OPEC as the group and its allies, known as OPEC+, gradually reverse record output cuts put in place last year.
At its December 2 meeting, OPEC+ agreed to increase monthly production by 400,000 bpd in January, despite fears over the new variant.
The report showed that OPEC production in November rose by 290,000 bpd to 27.72 million bpd, thanks to increases from the two main producers, Saudi Arabia and Iraq, and a recovery after blackouts in Nigeria.
Traders are watching for signs of a major rebound in U.S. shale supply as higher prices prompt more investment, which could hurt OPEC+’s efforts to support the market.
But this month, OPEC left its tight U.S. oil growth forecast, another term for shale, broadly flat at 600,000 bpd in 20222. The non-OPEC global supply growth forecast in 2022 is remained unchanged.
For now, OPEC has room to increase production further from November’s rate, the report said. OPEC said it expects the world to need 28.8 million bpd from its members in 2022, up 200,000 bpd from last month.
(Editing by Jason Neely and David Evans)
Copyright 2021 Thomson Reuters.