OPEC +, higher oil demand

According to four sources on Wednesday, OPEC and its allies are likely to continue moderate oil output increases. Despite raising the 2022 demand forecast and facing U.S. pressure to increase supply more quickly.

At 1500 GMT, the Organization of the Petroleum Exporting Countries and Allies (OPEC+), led by Russia, will meet.

They agreed in July to gradually phase out record output cuts by adding 400,000 barrels per day (bpd) to the market each month. 

According to one source ahead of Wednesday’s talks, (OPEC+) would most likely stick to the deal. On Tuesday, OPEC+ experts raised their prediction for 2022 oil demand growth to 4.2 million bpd, up from 3.28 million bpd previously, thus paving the way for increased output in the future.

Based on data from 2021, the prediction for 2022 appears to be optimistic. After a historic reduction of almost 9 million bpd in 2020 due to the COVID-19 epidemic, OPEC+ forecasts demand to climb by 5.95 million bpd this year. However, demand will only grow by roughly 3 million bpd in the first half of 2021.

Brent crude

Demand has fallen short of forecasts, and there are still challenges, notably in Asia. We estimate the request to return to 2019 levels only in the second half of 2022. This is according ti Amrita Sen, the Energy Aspects think tank co-founder.

The U.S. has urged OPEC+ to boost output more quickly, as benchmark Brent crude climbed above $72 per barrel, close to multi-year highs. 

The revised demand prediction came during the OPEC+ joint technical committee (JTC). It presented an updated assessment on the state of the oil market in 2021-2022 on Tuesday. According to OPEC+ sources, the evaluation, which has yet to be made public, predicts a 0.9 million bpd deficit as global demand rebounds this year.

The sources state that the analysis initially predicted a 2.5 million bpd surplus in 2022. However, this later reduces to a 1.6 million bpd surplus due to increased demand.

According to the sources, commercial oil inventories in the OECD, a grouping of predominantly affluent countries, will remain below the 2015-2019 average until May 2022 rather than January 2022, as previously predicted.