- The global consumption of crude oil in 2021 was around 98 million barrels a day.
- Crude oil prices spiked to US$100 per barrel in March 2022.
- OPEC+, the United States, and the International Energy Agency combined to release 240 million barrels of oil to the global market.
Crude oil is a mixture of hydrocarbons present in a liquid state at atmospheric pressure. It is found naturally in underground reservoirs and deep seabeds. It also contains small amounts of non-hydrocarbons, like sulphur and metals.
Crude oil is processed in refineries to make various products like gasoline, natural gas, diesel, petroleum products, etc. Approximately, there are 100 countries which produce crude oil. Five of those 100 countries accounted for 51% of the world’s total crude oil production in 2021. They were the United States (14.5%), Russia (13.1%), Saudi Arabia (12.1%), Canada (5.8%), and Iraq (5.3%).
Crude oil is a liquid commodity whose price varies due to several reasons.
Crude Oil’s World Consumption, Production and Prices in First Quarter of 2022:
The global consumption of crude oil in 2021 was around 98 million barrels a day, but this was impacted by the COVID-19 pandemic, lockdowns, and restrictions on mobility, which affected global industrial activities, travel, and leisure. Global economic growth rebounded in 2021 with the rollout of the vaccination. The recovery was expected to continue in 2022, and consumption was predicted to surge by 2.2%.
By the end of March, the demand was slowing down again due to the outbreak of the Omicron variant. Due to the virus transmission rate and continuous vaccination roll out, minimum mobility restrictions were expected in the second half of the year.
The demand for transportation fuel continued to recover as in February, many European nations lifted work-from-home conditions and relaxed other restrictions too. A strong growth in fuel consumption was predicted for the upcoming quarters. Global airline travel also recovered in this period. Natural gas prices surged in Asia and Europe in the second half of 2021, leading to increased oil demand in Europe.
Global oil consumption was forecasted to grow, but the Russian invasion of Ukraine in February 2022 added uncertainties to it.
Global oil production averaged 95 million barrels a day in 2021 and was predicted to rise in 2022, but the Russian invasion added to the gloom. Russia’s oil production also took a hit due to the ongoing conflict and sanctions imposed by the western countries. OPEC+ countries increased their output targets, and oil production was recovering in non-OPEC+ countries.
Prices of crude oil rose in 2021 to an average of US$70 per barrel. From the beginning of 2022, the global oil demand was increasing, and economic activities were recovering globally. The market led the crude oil price to jump by 15% in January 2022 to an average of US$86 per barrel. Again, in the month of February, crude oil prices increased by 12% to an average US$96 per barrel due to concerns relating the Russian invasion.
After the invasion, the risk of energy supply shocks, and the imposition of sanctions on Russia, crude oil prices spiked to US$100 per barrel in March 2022, but those prices remained volatile. The prices are projected to elevate in 2022 and 2023 as the consumption increases.
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Crude Oil’s World Consumption, Production and Prices in Second Quarter of 2022:
The first quarter witnessed a steady rise in global oil consumption since containment measures were relaxed and major international borders were opened for trade. Geopolitical developments and severe COVID-19 measures in China were expected to slow down the oil demand in the June 2022 quarter. The increasing global mobility supported the demand for gasoline and diesel. Total global air traffic in April 2022 was up 79% vs. April 2021. The aviation industry had a slower recovery owing to COVID-19-led restrictions in China and sanctions over Russia. Oil consumption was forecasted to reach 102 million barrels per day by 2024.
Russia faced the sixth round of sanctions at the end of May 2022 in which the European Union banned the purchase of crude oil and petroleum products from Russia. The United States also announced a ban on Russia’s oil, gas, and energy imports. Asian countries helped Russia to absorb some of the export shocks due to these sanctions.
OPEC+, the United States, and the International Energy Agency combined to release 240 million barrels of oil to the global market. At the time of this release, the impact was still uncertain. Further, OPEC+ agreed to increase oil production by 648,000 barrels a day in July and August.
Prices of crude oil rose to US$134 per barrel on 8 March 2022. Due to the weakening demand in April and COVID-19 outbreaks in China, the average price per barrel of crude dropped. The prices remained volatile as the EU imposed sanctions on Russia, but the supply decisions of OPEC+, the US and the IEA helped prices to rise. As a result, Brent was predicted to cost US$108 per barrel in September 2022.
Scheduled production hikes by OPEC+ and increasing production from other producers shall lead to a gradual fall in prices in next two years.
Crude Oil’s World Consumption, Production and Prices in Third Quarter of 2022:
China introduced lockdown restrictions in major cities under the zero-COVID policy. With the anticipation of such new outbreaks, the oil consumption was predicted to deplete in the third and fourth quarters of 2022. The jet fuel demand continued its recovery in the OECD. Prices of natural gas were surging, leading to revived interest in fuel switching in Europe and the Middle East. Heat waves were experienced in the Northern Hemisphere, resulting in increased use of crude oil for power generation.
Economic sanctions on Russia led to a significant increase in Indian imports. Indian oil consumption was expected to grow by 8% year on year in 2022.
Oil prices kept fluctuating in 2022 due to the Russian invasion of Ukraine and the risks of energy supply shocks. In July 2022, Brent price averaged US$109 per barrel, but in early August 2022, the price dipped below US$100 per barrel. This trend is expected to continue and reach US$98 per barrel by December 2022.
High inflation, the implementation of EU sanctions on oil imports from Russia, a decline in the usage of natural gas due to high prices, and the orientation of global trade, will have a huge impact on global crude demand and subsequently on the prices.
Some ASX Crude Oil Stocks
Data Source: ASX as on 29 November 2022