Omicron Covid variant to reduce global oil demand, IEA says

A tanker truck drives past oil well pump jacks operated by Chevron Corp. in San Ardo, California, United States, on Tuesday, April 27, 2021.

David Paul Morris | Bloomberg | Getty Images

Oil demand is expected to fall below expectations next year, the International Energy Agency said on Tuesday, as it revised down its outlook by 100,000 barrels per day for the remainder of the year and 2022.

In its report on the oil market, the IEA said that global oil demand is now expected to increase by 5.4 million barrels per day in 2021 and 3.3 million barrels per day in 2022 to reach the levels before the pandemic of 99.5 million barrels per day worldwide.

But the recovery is expected to be affected by a new wave of Covid-19 cases, with jet fuel hit hard, according to the report. Its authors noted that the emergence of the new omicron variant has already resulted in new restrictions on international travel.

However, the IEA added that while the increase in new Covid cases is expected to slow demand, the recovery that is already underway should not completely derail.

Production greater than demand

Despite this uncertainty, production is set to exceed demand from December, according to the report, driven by increased production from the United States and OPEC + countries. This upward trend would continue until 2022, the IEA said, with the United States, Canada and Brazil poised to pump to their highest annual levels ever.

Saudi Arabia and Russia could also break records if the remaining OPEC + cuts are reversed entirely,” the IEA said. “In this case, the global supply would increase by 6.4 mb / d next year against an increase of 1.5 mb / d in 2021.”

The outlook for the IEA is slightly in conflict with the expectations for OPEC +. The oil-producing consortium released its own report on Monday and was more optimistic than the IEA about the recovery in demand next year.

OPEC + predicted that the omicron variant would have a moderate impact on oil markets and said it expects demand to reach 100 million barrels per day by the third quarter of 2022. It also has increased its demand forecast for the first quarter of 2022 by 1.1 million barrels. per day.

In November, OPEC + increased its production of crude 500,000 barrels per day, as he unwound the production cuts he agreed to at the start of the coronavirus crisis.

The organization agreed in the spring of 2020 – as oil prices collapsed in the face of the pandemic – to cumulatively reduce nearly 10 million barrels per day of crude production.

Darker outlook for oil prices

Regarding oil prices, the IEA has also lowered its outlook.

“Our oil price assumption (based on the forward curve) is about 15% lower for 2022 compared to last month’s report,” the report’s authors said. “Brent prices average $ 70.80 / bbl in 2021 and $ 67.60 / bbl in 2022. “

Brent crude oil futures were trading slightly lower on Tuesday, erasing earlier gains to trade at around $ 74.27 a barrel by 10am London time.

US West Texas Intermediate crude futures were also slightly lower, trading just above $ 71 a barrel.

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