BAKU, Azerbaijan, Jan.8
By Leman Zeynalova – Trend:
Growth in oil demand is expected to slow sharply this year in tandem with economic growth, Trend reports with reference to Capital Economics, UK-based research and consulting company.
“Given that we also expect OPEC+ and US crude output to rise, we see the market moving into a surplus, which will drag on prices. Stocks, which fell sharply in 2021, will start to be rebuilt. There are major risks to our forecast, particularly on the supply side. OPEC+ may continue to under-produce but, on the other hand, a nuclear deal with Iran could give a boost to supply. And while the pandemic continues to rage, it could dent demand: jet fuel demand looks particularly vulnerable,” reads the latest report released by Capital Economics.
The company analysts note that oil prices slumped following the emergence of Omicron in late November 2021, which sparked fears of demand destruction.
“However, prices subsequently rallied strongly as Omicron appeared less deadly and governments held back on re-imposing travel restrictions. At the same time, there were reports of production outages in Libya. And while OPEC+ continues to target 400,000 bpd monthly increases in output, the reality is that OPEC production is falling short of target. That said, US output has ticked up and we expect further gains given relatively high prices.US implied product demand had been strong. But there was a surge in gasoline stocks in late December suggesting households were more cautious about travel. Meanwhile, travel within Europe had already been slowing prior to Omicron's arrival due to some government-led restrictions,” reads the report.
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