Demand for oil is set to be lower than expected next year, the International Energy Agency said Tuesday, as it revised down its outlook by 100,000 barrels per day for both the remainder of this year and 2022.
In its Oil Market Report, the IEA said global oil demand was now expected to rise by 5.4 million barrels per day in 2021 and 3.3 million barrels per day in 2022 to hit pre-pandemic levels of 99.5 million barrels per day globally.
The recovery is expected to be affected by a surge in new Covid-19 cases, with jet fuel being hit hard, the report said. Its authors noted that the emergence of the new omicron variant had already brought about new restrictions on international travel.
However, the IEA added that while the rise in new Covid cases was expected to slow demand, the recovery that is already underway was not expected to be completely derailed.
Production to outpace demand
Despite this uncertainty, production is poised to outpace demand from December, the report said, led by increased output from the U.S. and OPEC+ countries. This upward trend would extend into 2022, the IEA said, with the U.S., Canada and Brazil set to pump at their highest annual levels ever.
“Saudi Arabia and Russia could also hit records if remaining OPEC+ cuts are fully unwound,” the IEA said. “In that case, global supply would soar by 6.4 mb/d next year compared with a 1.5 mb/d rise in 2021.”
With regards to oil prices, the IEA also revised its outlook downward.
“Our oil price assumption (based on the forward curve) is roughly 15% lower for 2022 than in last month’s report,” the report’s authors said. “Brent prices average $70.80/bbl in 2021 and $67.60/bbl in 2022.”