The effect of the Omicron variant on global oil demand has been weaker than expected a month ago, and the oil market is set to be well-supported throughout 2022 despite monetary tightening policies, OPEC said on Tuesday, leaving its demand growth estimates for this year unchanged.
In its closely watched Monthly Oil Market Report (MOMR) today, OPEC kept its oil demand growth forecast for 2022 unchanged at 4.2 million barrels per day (bpd). Average global consumption is set to reach 100.8 million bpd, exceeding pre-COVID levels.
The Omicron impact was indeed mild and short-lived, OPEC said, reiterating its December view, when it didn’t make any significant changes to demand forecasts either.
After Q4 2021 ended, OPEC has now adjusted its oil demand forecast for the last quarter of 2021 higher, “mainly to account for stronger-than-expected demand in Americas and the Asia Pacific and despite the emergence of the new COVID -19 variant (Omicron),” the cartel said in its January MOMR.
OPEC does not expect monetary actions from the Fed and other central banks—which have already signaled rate hikes are coming this year—to slow the current global economic momentum.
“In summary, monetary actions are not expected to hinder underlying global economic growth momentum, but rather serve to recalibrate otherwise overheating economies. With an ongoing robust oil demand forecast, and the continuing efforts of OPEC Member Countries and non-
OPEC countries participating in the DoC, the oil market is expected to remain well-supported throughout 2022,” OPEC said.
The emergence of new variants after Omicron is a key uncertainty for 2022, as are supply chain bottlenecks that could hold back some of the momentum, OPEC said.
The cartel’s figures for its oil production in December are also a bullish signal for the oil market. For yet another month, OPEC’s production increase was lower than what it is entitled to under the deal. OPEC’s crude oil production rose by 170,000 bpd last month, per the cartel’s secondary sources, compared to a 253,000-bpd allowed monthly increase under the OPEC+ deal.