Commodities

3 Jan 2022

Omicron Reverse the Recovery in Oil Demand; Supply Glut Worries Rise

The Index Today

A Reuters poll showed on Friday that the oil analysts have lowered their price forecasts for 2022 as the Omicron coronavirus variant is blocking the recovery of fuel demand and risks a supply glut as producers pump more oil.

Benchmark Brent crude prices, currently trading around $80 a barrel, are on track for their biggest yearly jump since 2009 as fuel demand bounced back.

However, the new Omicron variant of coronavirus is spreading faster, causing nations to tighten restrictions. If curbs continue, it could reverse the recovery in oil demand.

Reuters survey of 35 economists and analysts forecast Brent crude would average $73.57 a barrel in 2022, about 2% lower than $75.33 consensus in November. It is the first reduction in the 2022 price forecast since the August poll.
U.S. crude is projected to average $71.38 per barrel in 2022, versus the previous month's $73.31 consensus.

Julius Baer analyst Norbert Rücker said, "With oil demand growth slowing, supply growth persisting, and the energy crunch easing, we see the oil market balance expanding rather than shrinking in 2022 and thus expect prices to trend lower from today's levels.

DBS Bank analyst Suvro Sarkar said, "On the supply side, OPEC+ strategy, U.S.-Iran nuclear talks and speed of U.S. shale recovery will all come into play but will be secondary to the demand side of the picture,"

Reuters data shows that the demand was seen growing by 3.2-6.0 million barrels per day (bpd) in 2022.