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Global oil demand could see downside risks due to the Omicron variant, the U.S. Energy Information Administration (EIA) said on Tuesday, slashing its world oil consumption forecasts for both 2021 and 2022.
In its Short-Term Energy Outlook (STEO) for December, the EIA now sees global oil consumption averaging 96.91 million barrels per day (bpd) this year, down by 620,000 bpd compared to last month’s forecast of 97.53 million bpd. Next year, world petroleum consumption is set to rise by 3.7 percent from 2021, up from the 3.4-percent growth estimated in November. EIA forecasts that global oil consumption will increase by 3.5 million bpd in 2022 compared to 2021.
However, the EIA’s estimate of average global oil demand in 2022 is now revised down to 100.46 million bpd, down by 420,000 bpd from 100.88 million bpd demand expected in last month’s STEO.
The EIA revised down its forecast of global oil demand for this quarter and the first quarter of 2022, partly as a result of recently announced travel restrictions following reported outbreaks of the Omicron variant.
“The potential effects of the spread of this variant are uncertain, which introduces downside risks to the global oil consumption forecast, particularly for jet fuel,” the administration noted.
“The Omicron variant has introduced additional uncertainty into oil markets for the coming months, and this uncertainty is reflected in the recent increase in oil price volatility,” said the EIA, noting that “The forecast is subject to significant revisions.”
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Following five consecutive quarters of demand exceeding supply since the third quarter of 2020, global oil stocks have drawn by 1.7 million bpd on average. These stock draws, however, are set to slow down to 900,000 bpd this quarter, the EIA said.
“With global oil stocks forecast to continue falling in December and with supply and demand moving into relative balance in 1Q22, we expect limited upward price pressure could emerge in the coming months,” the administration said.
The EIA sees Brent Crude prices averaging $71 a barrel in December and $73 per barrel in the first quarter of 2022. For full-year 2022, Brent is expected to average $70 per barrel.
“For 2022 as a whole, we expect that growth in production from OPEC+, of U.S. tight oil, and from other non-OPEC countries will outpace slowing growth in global oil consumption, especially in light of renewed concerns about COVID-19 variants,” the EIA said.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.