BAKU, Azerbaijan, Dec.9
By Leman Zeynalova – Trend:
Four factors will shape the next steps of OPEC+ in 2022, Trend reports with reference to the Oxford Institute of Energy Studies (OIES).
The first one, according to OIES, is the global oil demand.
“The emergence of the Omicron variant is a clear reminder that COVID-19 could still surprise causing the reintroduction of mobility restrictions, partial lock downs, and disruption to supply chains. Economic recovery is also facing some headwinds in the shape of inflationary pressures and bottlenecks and potential shifts in monetary and fiscal policy. On the other hand, oil demand still has upward potential, especially if the momentum in air travel is not dented by concerns about the Omicron variant,” OIES experts believe.
The second factor is the OPEC+ spare capacity. The ability of some OPEC+ members to meet their targets as OPEC+ eases its cuts (and the size of available spare capacity) will come into focus and will be a key dynamic shaping the market in 2022.
The third one is the US shale response. The supply response to high oil prices from US shale has been relatively limited especially when compared to other cycles. Under the pressure from their financial backers, US shale firms have focused on returning money to shareholders, strengthening balance sheets and improving cash flow. Investors and capital markets have not been sending US shale players signals to increase their capex budgets and activity. This does not imply that this could not change in H2 2022 and in 2023, and US shale could still surprise on the upside.
The fourth factor is the ramp up of Iranian barrels. Iran is currently outside of the current OPEC+ agreement and its quota will come into focus when Iran reaches its October 2018 production level of around 3.8 mb/d.
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