OPEC commemorates EIA’s cautious outlook on oil demand

Oil prices have held up above the $ 80 per barrel mark since early October. The strength of the US dollar and the bearish monthly OPEC report on the oil market and the possibility of the US pulling out of its Strategic Oil Reserves (SPRs) have still not pushed prices below the bar. $ 80.

OPEC’s monthly report commemorates the previous U.S. Energy Information Administration (EIA) Short Term Energy Outlook (STEO), which was seen as bearish for global oil markets in 2022.

Both monthly reports contained a cautious outlook on oil demand, but they did not take into account that the return of air travel could lead to stronger than expected growth in oil demand for 2022.

OPEC reduced its oil demand for the fourth quarter of this year by 330,000 barrels per day (bpd). This could imply weaker growth in oil demand for 2022, suggesting that oil prices could be turbulent due to the imbalance of supply and demand.

OPEC forecasts global oil demand growth of 4.15 million bpd in 2022 to reach 100.6 million bpd unchanged from last month. OPEC’s forecast for the fourth quarter of this year was bearish as higher oil prices will dampen demand for oil in line with the renewed production strategy of OPEC + producers.

OPEC did not reflect the upward revision in fourth quarter oil demand due to the switch from natural gas to oil in the power sector in parts of Asia and Europe in the outlook. 2022.

The EIA forecasts global oil demand to average 97.5 million b / d for the whole of 2021, an increase of 5.1 million b / d from 2020 and an increase 3.3 million bpd in 2022.

OPEC reported a slight increase in OECD oil stocks in September, to 206 million barrels below the last five-year average and 374 million barrels below the same month last year.

The EIA expects U.S. crude production to reach an annual average of 11.9 million bpd in 2022, which is still lower than its record annual average of 12.23 million bpd in 2019. This will allow to producers of low-cost oil to become the key to the upstream. the investment in the future will be the low cost producer and not the volume producers.

Still, the EIA predicted that the global oil market would run in surplus and prices would fall by the start of next year with the build-up of global oil stocks in 2022, driven by increased production of OPEC + and the United States, as well as slowing growth in global oil demand.

While the Bank of America predicts oil prices at $ 120 in 2022, EIA forecasts suggest a maximum monthly average of the WTI price of $ 81 in November of this year with a gradual decline to an average of $ 72. in 2022 due to the growth in oil production from OPEC + and the United States. shale oil that will exceed the slowing growth in global oil demand.

The EIA monthly STEO has already paved the way for OPEC + to move to 2022 with a tight oil supply strategy due to the uncertain outlook for oil demand expected. This runs counter to the White House’s earlier demand for OPEC + producers to increase their oil production. We will know the OPEC + production strategy when producers meet in early December to decide on the next 2022 production strategy and how to reflect this uncertain growth in oil demand on their production strategy.
Source: Investing.com


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Felix J. Dixon