Oil Demand Threat Imposed by Omicron Variant

Oil forecasters have parted company on their views regarding demand in the forthcoming months, as the omicron variant of the coronavirus circulates rapidly around the world. And producers have appeared as the unpredictable bulls in the latest round of estimates.

The International Energy Agency, the U.S. Energy Information Administration, and the Organization of Petroleum Exporting Countries have all adjusted their oil market projections for the period to the end of next year. Each is trying to get to grips with the influence of the latest coronavirus strain. Omicron emerged only in late November and already accounted for 20% of verified cases in England.

One difference is their opinion of oil demand in the first quarter of 2022.

Rising case numbers and international travel constraints have led the IEA and EIA to slash their consumption assessments through March. However, OPEC is on a very different path. Its current quarter projection remains intact from its published a month ago. At the same time, its outlook for the beginning of 2022 has been adjusted upward. The growth should be about 1.1 million barrels a day. 

Influence of The Issues

There are existing inflation and supply chain bottlenecks, continuing trade problems, and their effect on industrial and transportation fuel requirements. However, the producer group noticed demand development underpinned by a stable economic outlook in advanced and emerging economies.

The leap in OPEC’s forecast of global oil demand in the first quarter of the following year is extensive. It came from changes made to the group’s analysis of the level of demand a year earlier, in the first three months of 2021.

Upward revisions to those figures, conducted by increases in consumption calculations in China and other non-OECD Asian countries, excluding India, mixed with steady levels of year-on-year growth, resulting in the experimental hop in demand at the beginning of next year.

Furthermore, at 5.3 million barrels a day, OPEC’s opinion of first quarter 2022 global oil demand development is now very close to the 5.34 million barrels predicted by the EIA.