The Organization of Petroleum Exporting Countries believes that oil demand is gradually recovering as it is close to reaching an agreement | Business and Economic News
OPEC’s latest forecast of oil demand is in line with its plan and its allies to increase oil supply and cool prices close to their highest level in two and a half years.
OPEC predicts that demand for its crude oil will gradually recover this year and next, as the organization is close to reaching an agreement to resume production that has been suspended since the pandemic.
The OPEC’s supply demand for OPEC will continue to rise, and by the second half of 2022, it will still be much higher than the organization’s current output and exceed the level before the virus outbreak. The group said that the global market has returned to surplus.
OPEC stated in its monthly report: “Looking forward to 2022, risks and uncertainties are increasing, and careful monitoring is needed to ensure recovery from the Covid-19 pandemic.” The report contains detailed estimates for the first time next year.
This mixed outlook is in line with the plan of OPEC and its allies (not yet approved) to gradually restore their massive production that is still offline in batches of 400,000 barrels per day. Before the roadmap is approved, the organization must first resolve the dispute between the United Arab Emirates and Saudi Arabia.
The two countries have made progress in resolving what the UAE says is an unfair dispute over low production restrictions. If they can overcome the painful deadlock, the alliance can proceed to restart the idle barrels.
With the lifting of the blockade by the United States and China, fuel consumption has rebounded, and international oil prices have approached their highest level in 2 1/2 years. London is about $74 per barrel. However, due to the threat of variants of the coronavirus and concerns that OPEC’s internal conflict may weaken its cohesion, crude oil prices remain volatile.
An analysis released Thursday by the research unit of the OPEC secretariat in Vienna highlighted why cartels should proceed with caution — and why Abu Dhabi’s insistence on increasing production was initially rejected.
OPEC predicts that global oil demand will increase by 3.3 million barrels (about 3.4%) per day in 2022, and will exceed 100 million barrels per day for the first time since the emergence of the coronavirus in the third quarter. But before reaching this level, consumption will rebound in the first quarter, falling back to 97 million per day.
The supply recovery of OPEC competitors will satisfy most of the rebound in demand.Next year, non-OPEC production will increase by 2.1 million barrels per day, or 3.3%, of which about one-third of the increase will come from the United States, the cartel’s long-term competitor.
By the second half of 2022, the organization’s demand for crude oil will exceed 30 million barrels per day, much higher than the 26 million barrels in June. This should allow OPEC and its partners to resume about 40% of their production cuts during the pandemic, bringing them close to normal levels of production.
The organization stated: “It is expected that the ongoing extensive stimulus measures and high savings rates in advanced economies will lead to the release of pent-up demand in the second half of 2021, which will continue until 2022.”
However, in the first quarter of 2022, OPEC crude oil production requirements will fall back to 26.4 million barrels per day-lower than the level that may increase this month once the plan increases. The coalition’s temporary plan is to provide more barrels of return in the coming months, which will make the surplus even larger.
This soft patch may help explain why Riyadh is working hard to ensure that the OPEC+ production limit agreement continues after the scheduled April expiration.