Covid’s Omicron variant emergence will see global demand slow by 100,000 barrels of oil a day for the rest of 2021 and 2022 according to the International Energy Agency’s latest forecasts.
The IEA trimmed its 2022 supply forecast from non-OPEC producers by 100,000 barrels a day and cut its demand forecast by the same amount, saying it expects the surge in coronavirus cases to stymie the recovery in global demand.
In its Oil Market Report, the IEA said global oil demand was now expected to rise by 5.4 million barrels a day in 2021 and 3.3 million barrels a day next year to hit pre-pandemic levels of 99.5 million barrels a day globally.
The IEA says it will be this negative impact on demand rather than increased supply that will help ease upward pressure on prices as we head in 2022.
Air travel and, in particular, the consumption of and demand for jet fuel, will be most affected by the Omicron variant, the IEA said in its monthly market report. The agency noted that the emergence of the new omicron variant had already brought about new restrictions on international travel.
But overall, the variant’s emergence will “temporarily slow, but not upend, the recovery in oil demand.”
Fears that the global economic recovery and resurgence in oil demand would feed inflationary pressures prompted major crude-consuming nations to tap their strategic oil reserves in November, just as Omicron infection rates began to gather speed.
Despite this uncertainty, production is poised to outpace demand from December, the report said, led by increased output from the U.S. and OPEC+ countries. This upward trend would extend into 2022, the IEA said, with the U.S., Canada and Brazil set to pump at their highest annual levels ever.
“Saudi Arabia and Russia could also hit records if remaining OPEC+ cuts are fully unwound,” the IEA said. “In that case, global supply would soar by 6.4 mb/d next year compared with a 1.5 mb/d rise in 2021.”
So far as oil prices are concerned, the IEA also cut its forecasts as well.
“Our oil price assumption (based on the forward curve) is roughly 15% lower for 2022 than in last month’s report,” the report’s authors said. “Brent prices average $US70.80/bbl in 2021 and $US67.60/bbl in 2022.”
Brent was well above $US86 a barrel in October. It settled just over $US73 a barrel on Tuesday.
