OPEC predicts increased demand for oil in 2022 as world emerges from pandemic

In its first detailed estimates for 2022, the Organization of the Petroleum Exporting Countries (OPEC) said on Thursday that global demand for crude would increase until next year as coronavirus vaccination efforts expand and travel fuel consumption increases.

In its closely watched monthly oil market report, OPEC said demand next year would increase by 3.3 million b / d to an average of 99.9 million b / d. The cartel said demand this year would increase by 6.0 million b / d to an average of 96.6 million b / d, unchanged from its June estimate.

“Strong expectations exist for global economic growth in 2022,” OPEC researchers said. “These include better containment of Covid-19, particularly in emerging and developing countries, which should stimulate demand for oil to reach pre-pandemic levels in 2022.”

Production at current levels would fail to keep pace with global consumption. OPEC said demand was on track to exceed supply by 1.5 million b / d in August, a gap that could widen further to 2.2 million b / d before the end of 2021. Demand for next year is expected to remain well above current production.

The researchers said, however, that the Delta variant of the coronavirus – and the potential for the emergence of other dangerous variants – makes forecasting tricky and production planning precarious.

“Looking ahead to 2022, the risks and uncertainties are significant and require careful monitoring,” OPEC said.

Saudi Arabia-led OPEC and its allied group of major Russian-led producers, aka OPEC-plus, reached a tentative deal this week to increase production by around 400,000 bpd each August to December.

However, the deal awaits ministerial approval at the next OPEC-plus meeting, which has yet to be scheduled.

At issue: the United Arab Emirates (UAE), a member of the cartel, said it had deposited a third of its production as part of the previous OPEC production cuts. To compensate, the UAE now wants to be allowed to increase production more than other members.

OPEC had reached a compromise with the UAE to allow it to increase its production to 3.65 million b / d by 2022. The UAE had pushed to increase its production to 3.8 million b / d from 3 , 2 million bpd, the Wall Street newspaper reported.

OPEC researchers made only vague references to the talks in the last monthly report. OPEC-plus countries “will continue to closely assess the various factors that could impact on-going developments on a monthly basis, thus being able to act quickly and very quickly to safeguard the delicate recovery of market balance, ”they said.

OPEC-plus currently adds more than 2 million barrels per day to the global market, a process that began in May and continues through July. The group’s increases since the start of the recovery in oil demand last summer will total around 4 million bpd at the end of July. The cartel cut production by 9.7 million bpd at the start of last year after the coronavirus reduced demand.

American production, meanwhile, has only taken a step forward this year. Production rose 100,000 barrels last week – following an increase of 200,000 barrels the week before, according to the US Energy Information Administration (EIA). The average of 11.4 million b / d for the week of July 9 marked a peak in 2021. However, production was still well below the early 2020 peak of 13.1 million b / d.

Inventories of commercial crude in the United States, excluding those in the Strategic Petroleum Reserve, are declining as demand exceeds supply. Inventories fell 7.9 million barrels last week, the EIA said. The decline extended more than two months of overall drawdowns and pushed oil inventories down to 437.6 million barrels, 8% below the five-year average.

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Felix J. Dixon