Global oil demand defied gloomy expectations from a month ago to withstand the Omicron wave with much less disruption than expected, the International Energy Agency (IEA) said on Wednesday, raising its demand growth estimates by 200,000 bpd for both 2021 and 2022.
Demand increased by 1.1 million bpd to 99 million bpd in the fourth quarter of 2021, defying expectations of a serious hit to consumption due to the Omicron wave, the IEA said in its Oil Market Report (OMR) for January today.
A month ago, the IEA said that the surge in COVID cases was set to temporarily slow the recovery in global oil demand, but the impact of the Omicron variant would likely be more muted than previous waves and will not upend the demand recovery.
Last week, IEA's Executive Director Fatih Birol said that oil demand had proven to be more resilient to the effects of the Omicron variant's spread than the IEA had expected.
Resilient demand in the face of record-high cases due to softer Covid restrictions prompted the IEA to raise its global demand estimates by 200,000 bpd for 2021 and 2022, and now expecting demand growth of 5.5 million bpd last year and 3.3 million bpd this year.
The market is tighter than expected, the agency said, but still warned that there would be a surplus in the first quarter of 2022, with "demand set for a seasonal decline, exacerbated by more teleworking and less air travel."
Stock draws are also estimated to have continued in November and December, the IEA's report found, contrary to previous forecasts that inventories in the OECD countries would start to build in Q4 2021.
In November, OECD total industry stocks were down by 354 million barrels from a year ago and at their lowest level in seven years, the IEA said.
"Preliminary data for December show OECD industry stocks falling by another 45 mb while volumes of oil on the water rose," the agency noted.
The IEA also noted the tighter market than expected just a month ago, saying that the "ICE Brent backwardation doubled, reflecting tight oil stocks."
By Tsvetana Paraskova for Oilprice.com
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Comments
Yet, since the Omicron variant came on the scene last year, I have been repeatedly saying in my comments to the oilprice.com articles that both the global economy and the global oil demand are robust enough to overcome the impact of the Omicron and that it is very unlikely that the global economy will return to lockdown. OPEC+ has also recognized that reality.
It is possible that the IEA was looking for bad news to depress oil prices for the benefit of its members (mostly western consumers).
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London