OPEC expects oil demand to grow beyond pre-pandemic levels by 2022. And while Joe Biden has acted to restrict the number of drilling permits on public lands, reducing oil production, OPEC is more than happy to fill increased demand. The Wall Street Journal’s David Hodari writes:
The world’s thirst for oil will exceed pre-pandemic levels next year, with improving vaccination rates and increasing public confidence in governments’ management of Covid-19 spurring a recovery in travel, the Organization of the Petroleum Exporting Countries said Monday.
In its closely watched monthly market report, OPEC raised its forecast for global oil demand for 2022 by just under a million barrels a day to 100.8 million barrels a day, higher than 2019’s demand level of 100.3 million barrels. OPEC had previously forecast a return to 2019 demand levels in the second half of next year, but Monday’s report was the first time the cartel said it expects demand to beat pre-Covid-19 levels for the full year.
OPEC’s forecast that oil demand next year will be even higher than before the pandemic comes despite efforts by governments and companies to slash fossil-fuel usage to hit net-zero emissions targets.
Combined with an unchanged supply-growth forecast for its non-cartel counterparts next year and a 200,000 barrel-a-day cut to the same forecast for this year—citing the impact of Hurricane Ida on U.S. oil production—OPEC’s estimates signal a tightening oil market. The pace of recovery in oil demand is now expected to be stronger than before and to mostly take place in 2022, after the emergence of the highly contagious Delta variant stymied recovery this year.
OPEC expects the variant’s impact to be felt in oil markets over the coming months. The cartel trimmed its demand forecast for the final quarter of this year.
While all of the world’s geographic regions are expected to contribute to the rebound in demand, oil consumption in the wealthy countries of the Organization for Economic Cooperation and Development is expected to remain below pre-pandemic levels, OPEC said. The cartel boosted its demand-rebound forecast for developing countries by twice as much—600,000 barrels a day—as that for OECD countries.
In addition to a steady economic recovery from the recessions brought about by the pandemic, “improvements in vaccination rates and a potential increase in public confidence in managing Covid-19 is anticipated to be more widespread in 2022, further supporting the recovery of oil demand, particularly transportation fuels,” the Vienna-based organization said in its report.
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