OPEC+ predicts oversupplied oil market in early 2022

OPEC+ predicts that the global oil market in the first quarter of 2022 will be more oversupplied than estimated, according to an internal report obtained by Reuters.

OPEC+ estimates the oil market will be oversupplied by 3.8 million bpd by March 2022.

This may create more opportunities for the Organization of the Petroleum Exporting Countries (OPEC) and its allies (collectively known as OPEC+) to suspend plans to add monthly oil supplies to the market.

OPEC+ currently estimates the market will have a surplus of 2 million bpd in January 2022, and this will increase to 3.4 million bpd and 3.8 million bpd in February and March, respectively.

The OPEC+ internal document also provides a rough assessment of the potential impact of Omicron – the new variant of Covid-19 – on global oil demand. In the short term, OEPC+ experts believe that the Omicron variant has a direct impact on jet fuel demand, especially in Africa and Europe.

Because, after the appearance of the new variant, many countries have banned flights from South Africa and other African countries. Israel and Japan have closed their borders to foreign visitors, while others, such as the UK, have tightened entry rules by requiring all foreign visitors, including vaccinated, still have to do PCR test and self-isolate until negative test result.

According to OPEC+ internal assessment, transport fuel demand in Europe may be affected by the Omicron variant. This new variant comes at a time when some European countries tighten restrictions due to the increasing number of Covid-19 infections. The Republic of Austria alone has a total blockade.

According to a report prepared for the OPEC+ technical committee meeting obtained by Energy Intelligence earlier this week, the alliance forecasts that global oil inventories in 2022 will increase faster than estimated. This report explains that the oil price’s slide to 70 USD/barrel at the end of last week is a kind of market reaction to the appearance of the Omicron variant.

OPEC and OPEC+ began meeting on December 1 to discuss output policy for January 2022. OPEC+ is expected to hold a ministerial meeting with the full participation of members after the announcement of the policy decision in January 2022.