U.K. based consultancy group Wood Mackenzie says it is unlikely that oil prices will rise above $100 a barrel (bbl) for any sustained period in this year.
“Under the careful stewardship of OPEC+, the market is back in balance again in 2022 on our forecasts,” said Simon Flowers, Chairman, Chief Analyst and author of The Edge.
Flowers said demand increases by 4.5 million b/d back to pre-pandemic levels of 100 million b/d by Q3, whereas supply rises by 4.8 million b/d, around half from OPEC+.
“Implied inventories show a surplus in Q1 2022 – we do not expect a shortage of supply. Our forecast is for Brent to average US$70/bbl, marginally below 2021,” he pointed out.
Regarding risks, Flowers said due to the impact of the coronavirus and its variants, WoodMac has already trimmed 2022 demand by almost 0.1 million b/d.
The consultancy group does not expect Iran sanctions to be lifted in 2022 but up to 1 million b/d of crude could return to market within months.
As it relates to geopolitics – Flowers said Russia/Ukraine, China/Taiwan and Belarus/Poland/EU are potential flashpoints that could spook markets.
Non-OPEC supply will see countries such as Guyana adding to global output in 2022. ExxonMobil’s Liza Phase 2 Development will soon come on stream, bringing total output this year for the South American county to around 340,000 barrels of oil per day.