Global oil demand has proven to be more resilient to the effects of the Omicron variant’s spread than the International Energy Agency expected, according to its chief, Fatih Birol, who spoke to media at a virtual meeting this week.
“Demand dynamics are stronger than many of the market observers had thought, mainly due to the milder Omicron expectations,” Birol said, as quoted by Bloomberg.
The head of the IEA also noted the supply disruptions in Libya and Kazakhstan, which also contributed to the imbalance with demand.
“We see some of the key producers including Nigeria, Libya and also Ecuador that have serious supply disruptions,” Birol said.
Ecuador has reduced oil production because of repairs on two key pipelines necessitated by advancing land erosion, but output rates should return to normal next month, according to an Argus report.
In Nigeria, production continues to be affected by technical and operational problems. Most other OPEC members and Russia have also found it hard to boost production in line with quotas.
The IEA forecast that global fuel consumption will decline considerably during this quarter because of pandemic-related restrictions, but it seems that the actual restrictions are not having such a grave effect on it.
At the same time, the IEA acknowledged in its December report that, unlike jet fuel demand, the demand for road transport fuels will remain strong even amid the latest surge in infections, also noting that it expected the effect of Omicron on oil demand to be more muted than previous strains.
The IEA forecast global oil demand to have grown by 5.4 million bpd in 2021, which is seen slowing down to 3.3 million bpd this year, with the total returning to pre-pandemic levels of 99.5 million bpd.
The next edition of the IEA’s Oil Market Report is scheduled for next Wednesday and may well contain some revisions in projections.
By Irina Slav for Oilprice.com
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That is why the IEA was surprised by the strength of oil demand dynamics when I and other oil experts were projecting that oil prices could to continue their surge well into the near future in what could be described as an oil supercycle.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London