OPEC Claims Omicron Will Have “Minor” Market Impact
December 14, 2021
Energy prices were lower yesterday and have settled into a sideways range. The major concern keeping prices stuck is the Omicron coronavirus variant causing world oil demand to fall. The US is also going to sell 18 million barrels of crude oil from the Strategic Petroleum Reserve on December 17th. Also, adding some pressure on prices is the EIA’s forecast in their Monthly Drilling Report that US shale oil production will increase in January. They say that shale oil production will increase by 96,000 BPD from December to January up to a total of 8.438 million BPD. OPEC is still claiming that the Omicron variant will be mild and short-lived and have a minor impact on demand.
The IEA in a report issued yesterday said the surge in new COVID-19 cases is expected to temporarily slow, but not upend, the recovery in oil demand that is underway and forecast supply to outpace demand in 2022, forecasting global supply to increase 6.4 million BPD vs the increase in 2021 of 1.5 million BPD creating a 1.7 million BPD surplus in Q1 2022.
European natural gas future prices for deliveries in January 2022 have hit a record level as the standoff between Russia and NATO over Ukraine, approval for the Nord Stream 2 pipeline to become operational, and possible financial sanctions threaten to reduce gas deliveries to Europe in the first few months of next year.