The Omicron variant of SARS-CoV-2 would slow the recovery in global demand for oil, but the market would be “more comfortable” next year, the International Energy Agency (IEA) said yesterday.
The oil market “appears to stand on a better footing than it has for some time,” the IEA wrote in its latest monthly report.
The emergence of Omicron at the end of last month “sparked a steep sell-off in oil, but initial pessimism has now given way to a more measured response,” it said.
“The surge in new COVID-19 cases is expected to temporarily slow, but not upend, the recovery in oil demand,” the agency wrote.
“New containment measures put in place to halt the spread of the virus are likely to have a more muted impact on the economy versus previous COVID waves, not least because of widespread vaccination campaigns,” it added.
The IEA, which unites oil-consuming countries and advises governments on energy policy, said it had revised downward its forecast for global oil demand by an average 100,000 barrels per day (bpd) for this year and next year due to new restrictions on international travel.
The agency said it is now forecast in an increase in global oil demand of 5.4 million bpd this year and 3.3 million bpd next year, when it would to return to pre-pandemic levels at 99.5 million bpd.
On the output side, global oil production was poised to outpace demand from this month, the IEA predicted, driven by higher production in the US and the countries that make up the so-called OPEC+ group of oil producers.
Earlier this month, OPEC and its allies agreed to stick to planned increases in output next month, despite the economic uncertainties linked to Omicron.
“As the upward supply trend extends into 2022, the US, Canada and Brazil are set to pump at their highest-ever annual levels,” IEA said.
“Saudi Arabia and Russia could also set records, if remaining OPEC+ cuts are fully unwound,” it added.
This could lead to surplus supply of 1.7 million bpd in the first quarter of next year and 2 million bpd in the second quarter.
“If that were to happen, 2022 could indeed shape up to be more comfortable,” the agency said.
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