Oil analysts have lowered their price forecasts for 2022 in case the Omicron coronavirus variant poses headwinds to recovering fuel demand and risk of a supply glut if producers pump more oil.
Trading around $80 a barrel, Brent crude oil prices made their biggest annual jump since 2009 as fuel demand bounced back. 2021 oil prices are on track to be the best year since 2009.
A poll of oil experts estimates that Brent crude will average $73.57 per barrel in 2022, about 2% lower than the consensus of $75.33 in November. This is the first drop in the 2022 Brent forecast since the August survey.
U.S. crude is projected to average $71.38 per barrel in 2022, versus the previous month’s $73.31 consensus.
If oil demand growth slows, supply growth continues, and energy shortages ease, the oil market balance is expected to expand rather than shrink in 2022, and prices are therefore expected to tend to be lower than today’s levels.
However, the new Omicron variant of the coronavirus is spreading faster, causing countries to tighten restrictions. Continuing restrictions could reverse the recovery in oil demand.
Once the current Omicron volatility wears off, a global recovery will be inevitable, and for now, the market will remain tense and oil prices likely to remain volatile with OPEC+ gradual output increases.
The Organization of the Petroleum Exporting Countries and its allies will meet on January 4 to decide on production policies after agreeing to stick to a plan to increase production by 400,000 barrels per day per month.
On the supply side, the severity of the course of mutating variants of COVID 19, the OPEC+ strategy, the US-Iran nuclear negotiations and the pace of the US shale recovery will come into play.
Oil demand is expected to increase by 3.2-6 million barrels per day in 2022.