Global oil demand rose in 2021 as the world began to recover from the coronavirus pandemic, and global consumption could potentially break a new record in 2022 – despite efforts to reduce fossil fuel consumption to mitigate change of the climate.
Gasoline and diesel consumption rose this year as consumers resumed travel and business activity increased. In 2022, crude oil consumption is expected to reach 99.53 million barrels per day (BPD), compared to 96.2 million barrels per day in 2021, according to the International Energy Agency. That would be a hair’s breadth of daily consumption in 2019 of 99.55 million barrels.
This will put pressure on both OPEC and the US shale industry to meet demand – after a year in which major producers were surprised by the recovery in activity, which overloaded supply and led to limited stocks worldwide. Many OPEC countries are struggling to add to production, while the US shale industry has to deal with investor demands to keep the cost line down.
After starting 2021at $ 52 a barrel, Brent crude rose to about $ 86 a barrel before falling at the end of the year.
It is projected that prices may resume in 2022 unless supply increases more than expected.
Researchers at Bank of America estimate that Brent will average $ 85 a barrel in 2022 due to low stocks and a lack of spare capacity.
Uncertainties stem from the impact of the Omicron, as many countries have again imposed travel restrictions that will harm the aviation industry and consumption.
“If this is another wave like the ones we’ve seen before, it’s a negative blow to economic growth in the first quarter of 2022,” said Damien Curvalin, head of energy research at Goldman Sachs. “But if there is a subsequent recovery, oil demand, which briefly hit pre-COVID levels in early November, will be at new record highs for most of 2022.”
The recovery in 2021 surprised suppliers by raising tensions between major producer countries and the world’s largest consumers such as the United States, China, and India.
With the sharp rise in gasoline prices earlier this year, US President Joe Biden called on the Organization of the Petroleum Exporting Countries and its allies – OPEC + – to increase total production after supply cuts for months.
However, OPEC countries are struggling to increase production due to insufficient investment, and data from Bloomberg and Reuters show that the group exceeded its production targets in November.
Similarly, the US shale industry is not responding to higher prices as before, succumbing to pressure from investors to limit costs. Total U.S. production averaged 11.2 million barrels per day in 2021, compared to a record nearly 13 million barrels per day at the end of 2019, according to the U.S. Energy Information Administration.
Canada, Norway, Guyana, and Brazil should add supplies next year, said Claudio Galimberti, senior vice president of analysis for Rystad Energy. U.S. oil production is expected to reach an average of 11.9 million barrels per day in 2022, according to the EIA.
Uncertainty about Omicron
Coronavirus cases are on the rise due to the highly contagious Omicron variant, and further outbreaks could slow recovery in major economies. The EIA and others slightly lowered their expectations, with the EIA lowering its forecasts for 2021 and 2022 by an average of 100,000 barrels per day to account for lower air travel.
“Even 5% of the unvaccinated population can create a crisis,” said Fereidun Fesharaki, chairman of the consulting firm FGE. “The idea that you can be 70, 80 or 90% vaccinated and economically OK is being challenged.”
However, there is still little evidence that Omicron had a dramatic effect on demand. Fuel stocks at the Amsterdam-Rotterdam-Antwerp (ARA) hub, a key European oil and gas supply region, have fallen over the past week, signaling stable consumption. Fuel prices are the highest recorded in the UK, according to data from the car services company RAC unit Fuel Watch.
In Asia, the refinery’s profit margins have fallen in recent weeks amid fears of demand, but overall expectations for 2022 are for further recovery, with higher profits for distillates such as diesel.
Emerging markets in Asia such as Indonesia and Thailand are expected to recover more strongly in 2022, said Peter Lee, senior oil and gas analyst at Fitch Solutions.
Gasoline demand is expected to grow by 350,000 barrels per day in 2022 in Asia, according to Richard Gori, managing director at JBC Energy Asia.
“Most of this growth in demand will come from India, followed by China,” he said. “But we will even see that demand in Japan is growing by 30,000 barrels a day as COVID restrictions gradually weaken.”
