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Highlights
- EIA estimates suggest that global oil inventories tumbled in January and commercial inventories in the OECD nations ended the month at 2.68 billion barrels.
- With thinning concerns related to the spread of the Omicron variant of coronavirus, energy demands are pushing up.
- The agency foresees Brent prices to average at US$90/bbl in February and next few months too.
Crude oil prices gained nearly 11% in the last one month. The staggering rise in the prices of crude oil is linked with a higher-than-expected drawdown in global oil inventories and heightened worries over possible oil supply disruptions amid ongoing tensions between Russia and Ukraine.
In its Short-Term Energy Outlook (STEO), US Energy Information Administration (EIA) points the above-mentioned factors to increase its outlook for oil prices in 2022.
The agency estimates global oil inventories tumbled in January and commercial inventories in the Organisation for Economic Cooperation and Development (OECD) ended the month at 2.68 billion barrels, the lowest since mid-2014.
Draws on the inventory averaged 1.8Mbpd from the third quarter of 2020 through the end of 2021. EIA believes that the draws will continue in the future too to keep oil prices around the current level of over US$90 per barrel.
Relevant Read: Crude oil records biggest monthly gain amid tight supplies
Retreating Omicron concerns
With thinning concerns related to the spread of the Omicron variant of coronavirus, energy demands are pushing up as global economies seem to be relaying back on track.
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At the same time, ongoing political tensions in the UAE due to Houthi rebels, a potential war between Russia and Ukraine, protests in Kazakhstan over high fuel prices, and blockades in Libya have together contributed to increasing uncertainties related to oil supplies.
Good Read: Crude oil rises on OPEC’s decision to boost output
EIA’s oil forecast
The agency foresees Brent prices to average US$90/b in February and next few months too. Further, EIA expects a downward price pressure in the middle of the year with a ramp-up in oil production from the US, OPEC+, and non-OPEC nations.
The above-stated dynamic is anticipated to increase global oil inventories from 2Q22 through the end of 2023. The agency forecasts the Brent spot price to fall at an average of US$87/b in the second quarter of 2022 and US$75/b in the fourth quarter of 2022.
Additionally, the agency also forecasts that worldwide petroleum and liquid fuels consumption will average 100.6 million b/d for all of 2022, nearly 3.5 million b/d up from 2021.
Must Read: WTI Crude surpasses US$90/bbl as frigid weather cascades across the US
Bottom Line
Global energy demand increased rapidly as concerns related to coronavirus thinned. At the same time, the worldwide supplies struggled to meet the rising demand, pushing oil prices to multi-year highs.
