Oil rally hits Omicron demand roadblock as glut worries rise

• First reduction in 2022 Brent forecast since August poll
• Oil prices on track for best year since 2009
• Oil demand seen growing by 3.2-6 million bpd in 2022
• Investors eye next OPEC’s move in Jan. 4 meeting

REUTERS: Oil analysts have lowered their price forecasts for 2022 as the Omicron coronavirus variant poses headwinds to recovering fuel demand and risks a supply glut as producers pump more oil, a Reuters poll showed yesterday.

A survey of 35 economists and analysts forecast Brent crude would average US $ 73.57 a barrel in 2022, about 2 percent lower than US $ 75.33 consensus in November. It is the first reduction in the 2022 price forecast since the August poll.

U.S. crude is projected to average US $ 71.38 per barrel in 2022, versus the previous month’s US $ 73.31 consensus.

“With oil demand growth slowing, supply growth persisting and the energy crunch easing, we see the oil market balance expanding rather than shrinking in 2022 and thus expect prices to trend lower from today’s levels,” said Julius Baer analyst Norbert Rücker.

Benchmark Brent crude prices, currently trading around US $ 80 a barrel, are on track for their biggest yearly jump since 2009 as fuel demand bounced back.
However, the new Omicron variant of coronavirus is spreading faster, 

causing nations to tighten restrictions. If curbs continue, it could reverse the recovery in oil demand. The global reopening will improve once the current Omicron surge has passed, said Edward Moya, senior market analyst at OANDA, adding that oil prices will likely remain volatile as OPEC+ keeps traders on edge with their gradual production increases.

The Organisation of the Petroleum Exporting Countries and its allies, known as OPEC+, will meet on January 4 to decide on their production policy after they agreed to stick to the plan of increasing output by 400,000 barrels per day per month. “On the supply side, OPEC+ strategy, U.S.-Iran nuclear talks and speed of U.S. shale recovery will all come into play but will be secondary to the demand side of the picture,” said DBS Bank analyst Suvro Sarkar.
Demand was seen growing by 3.2-6.0 million barrels per day (bpd) in 2022.