The outlook for the oil market in 2022
Following a strong rebound in 2021, global economic growth in 2022 is forecast to grow by 4.1%, y-o-y (Graph 1). This forecast assumes continued progress in the containment of the COVID-19 pandemic. Moreover, the ongoing broad-based stimulus measures and high saving rates in advanced economies are forecast to lead to a release of pent-up demand in 2H21, which will carry over into 2022. Consumption is forecast to improve, particularly in the contactintensive sectors. However, a strong recovery could lead to a quick rise in inflation and consequently rising interest rates. Very high sovereign debt levels could thus become a considerable burden for the fiscal health of many economies. The positive developments in the containment of the pandemic as well as the solid expectations for global economic growth are assumed to spur consumption for oil in 2022, with world oil demand forecast to grow by 3.3 mb/d y-o-y, to average 99.9 mb/d.
World oil demand in 2H22 is expected to exceed 100 mb/d. Within regions, OECD oil demand is forecast to rise by 1.5 mb/d. Of this, OECD Americas is expected to rise firmly, with US oil demand marginally below 2019 levels, mainly due to lagging transportation fuel demand. OECD Europe and Asia Pacific will grow, but remain below 2019 levels. Non-OECD oil demand is projected to show an increase of 1.8 mb/d, rising the most in China and India to exceed pre-pandemic levels, supported by a recovery in transportation fuels and firm industrial fuels demand, including petrochemical feedstocks. In terms of fuels, gasoline and diesel are expected to lead oil demand growth in 2022. The gradual return to normalcy is expected to support mobility in major consuming countries, such as the US, China and India. Both on-road diesel, including trucking, as well as increasing industrial, construction and agricultural activities in OECD America, Europe and China will support diesel demand. Light distillates will be supported by capacity additions – NGL plants in the US, Propane Dehydrogenation (PDH) plants in China, and steady petrochemical margins. Jet fuel will continue to recover, as domestic and international air travel pick up, but business travel is expected to lag. Uncertainties remain, including COVID-19-related challenges and their impact on transportation fuels; the above-mentioned economic developments; extreme weather; technological advances, including digitalization; penetration of electric vehicles; and energy policy changes.
Non-OPEC oil supply is forecast to grow by 2.1 mb/d y-o-y in 2022, on stronger demand and higher oil price levels. Upstream investment in non-OPEC countries is expected at around $348 billion, a minor increase from 2020-2021 levels, but still only half of the $737 bn seen in 2013. The expected cumulative output from new projects has been decreasing, from 109 mb/d in 2013 to only 19 mb/d in 2021. US production is forecast to grow by 0.7 mb/d. Oil production growth in North America, forecast at 0.9 mb/d, will come from the Permian Basin, Gulf of Mexico and oil sands in Canada.
Oil production in Brazil, Norway, Guyana, China, India and the UK is expected to increase through the ramping up of existing projects and new field start-ups. Moreover, OPEC NGLs are forecast to grow by 0.1 mb/d y-o-y. Looking ahead to 2022, risks and uncertainties loom large and require careful monitoring to ensure the recovery from the COVID-19 pandemic. OPEC and the non-OPEC countries participating in the Declaration of Cooperation (DoC) will continue to closely evaluate the various factors that could impact the ongoing developments on a monthly basis, thereby being able to act swiftly in a very timely manner to safeguard the delicate recovery of the market balance.