In its latest Monthly Oil Report, the IEA called on OPEC+ to increase production in order to counter higher demand in 2022.
The agency claimed that, based on current global economic growth expectations, demand for crude oil and petroleum products will be reaching pre-COVID levels by 2022. The Paris-based energy watchdog, which has come under fire after its shocking Net-Zero by 2050 report called for no more investments in oil and gas, stated that “OPEC+ needs to open the taps to keep the world oil markets adequately supplied”. At the same time, the IEA has also reiterated that market realities are at odds with its proposed strategies to reach net zero-emission levels by 2050. Criticism will likely be harsh for the “former” leading oil and gas agency, as the agency has called upon the world to double down on renewables and commit to the Paris Agreement while admitting that the global economy continues to demand vast amounts of hydrocarbons.
The relevance of some of these reports will have to be reassessed, especially when looking at the high-profile “Golden Age of Gas” report and the “Net Zero by 2050” roadmap. When asked what needs to be done, the IEA indicated that the call on OPEC+ will be very strong, as the international oil and gas producers group will need to increase crude oil supply to the market by 1.4 million bpd in 2022. Which would mean a significant increase over its current July 2021-March 2022 targets.
The demand expectations of the IEA fall in line with some others, as OPEC, the EIA, and independent consultants, have stated before that demand for oil is going to increase substantially. Some even expect volumes in 2022 to be higher than 2019 levels, even as prices are increasing substantially.
A potential additional 1.4 million bpd on the market will not make a real dent in the current bull market. Even Iran’s additional oil exports, if a JCPOA deal is reached, will only mitigate some of the upward price risks. The main wildcard at present is US shale, which could be incentivized by higher crude prices to ramp up production.
The current market situation is very clear. OPEC+ is leading the sector, no matter what political strategies or activist shareholders at IOCs are planning. The market is still fully hydrocarbon addicted, and this will not change overnight.
The IEA also needs to reassess its current strategies and press approach, as a continuation of the diffuse ‘’Lala-land predictions’’ will not make their case stronger.
As indicated by the IEA OMR report demand will increase by 5.36 million bpd in 2021, and another 3.07 million bpd in 2022. At the end of 2022, global demand is expected to be at 99.46 million b/d on average.
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This optimism in the market is widely shared, looking at price predictions from Goldman…
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