Riyad December 13 2021: OPEC on Dec. 13 sharply raised its forecast for oil demand in the first quarter, narrowing a projected oversupply, as it expects the omicron variant to have a transitory impact on the global economy.
The producer organization now sees the world consuming 99.13 million b/d of oil in the first three months of 2022, an increase of 1.1 million b/d from its forecast last month, when pessimism about the spread of omicron, along with lingering — and in some cases worsening — hotspots of previously identified variants, had led to some consideration about pausing its planned output hikes.
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Instead, OPEC and its Russia-led allies decided at their Dec. 2 meeting to stay the course with a 400,000 b/d production quota increase for January. Of that amount, about 253,000 b/d is allocated to OPEC’s 13 members.
“Improved COVID-19 management and rising vaccination rates [will enable] economic activity and mobility to return to pre-pandemic levels, supporting transportation fuels in particular,” OPEC said in its closely watched monthly oil market report. “Meanwhile, as vaccination rates increase, the impact of the omicron variant is projected to be mild and short-lived.”
For the full-year 2022, OPEC forecasts global demand will average 100.79 million b/d, while 2021 demand will come in at 99.63 million b/d.
Both figures are about 200,000 b/d higher than in last month’s report, with the bulk of the upward revisions coming in Asia, leaving the year-on-year growth rate unchanged.
“Some of the recovery previously expected in 4Q21 is now shifted to 1Q22, followed by a more steady recovery throughout 2H22,” OPEC said.
Non-OPEC supply and OPEC NGLs forecasts, meanwhile, were left essentially the same from November.
Surplus still expected
The figures still suggest a surplus for early 2022, though smaller than before, with the so-called call on OPEC crude pegged at 27.89 million b/d for the first quarter, rising to 28.31 million b/d in the second, 29.54 million b/d in the third and 29.58 million b/d in the fourth.
OPEC pumped 27.72 million b/d in November, according to the six secondary sources used by the organization to track output, including S&P Global Platts.
If the group and its allies continue on their path of raising quotas by a collective 400,000 b/d every month, OPEC production will surpass the Q1 call and likely the Q2 call, as well.
However, several countries, such as Angola and Nigeria, are pumping well below their quotas, increasingly concentrating the group’s spare production capacity in Saudi Arabia, the UAE and Kuwait. That could create a supply squeeze towards the latter half of 2022, if demand returns to or surpasses pre-pandemic levels, as expected.
For now, the oil market is “in a good condition,” UAE energy minister Suhail al-Mazrouei told reporters Dec. 13 on the sidelines of a maritime conference in Dubai.
“We have made our latest decision based on studying all the fundamentals of the market and we are confident that we are moving to a well-supplied market in the first quarter,” he said.
