OPEC said this Thursday on its latest monthly report that oil demand should recover through 2021 and further consolidate for 2022; the Organization’s forecast comes despite the growing concerns about the spread of Delta; the new coronavirus string that has weighed on prices.
Firstly, the Organization also reports that supply from oil producing countries rival to the cartel, like the U.S. will also peak production; specifically for shale gas, as they will experience headwinds for their production efforts and from allied groups in order to balance the market.
Secondly, OPEC’s view is that demand will outpace the worries for pandemic-related restrictions or setbacks; however, such forecast goes against the International Energy Agency’s outlook; which trimmed its outlook this Thursday. The IEA sees steady growth for. 2021, but slower recovery for 2022.
Thirdly, oil demand will rise by 5.95 million barrels per day (bpd) this year; or 6.6%, unchanged from last month’s forecast, OPEC said in the report. In 2022, fuel use will expand by 3.28 million bpd, OPEC said.
Moreover, the Organization also remarked. “The global economy continues to recover. However, numerous challenges remain that could easily dampen this momentum. In particular, COVID-19-related developments will need close monitoring.”
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OPEC sees shale from U.S. rising substantially
In addition, after OPEC’s report, oil began trading at $71 a barrel. Prices have risen to pre-pandemic highs above $77 this year, as we reported previously; boosted by economic recovery hopes and OPEC+ supply cuts, although concern about the Delta variant has weighed.
Furthermore, OPEC remarked. “The path of the COVID-19 pandemic will be the overarching factor impacting the near-term pace of the recovery; with the potential emergence of new COVID-19 variants and/or mutations posing a particular risk.”
On the other hand, the report from the Organization forecasts a 2.9 million bpd rise in supply from OPEC’s rivals in 2022; which is 840,000 bpd more than seen last month, mainly due to the decision by OPEC+ to pump more and as higher prices spur investment.
Finally, shale production from the U.S. may rise by 560,000 bpd in 2022, up 60,000 bpd from last month’s forecast, after a contraction this year. “In the U.S., operators have remained highly disciplined in 2020-2021. Nevertheless, rig count continue to rise, more wells are under fracking and more frac crews are deployed; as firms are again flush with free cash flow.” OPEC said.
