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IEA lifts 2022 average crude oil price assumption to $79.40/bbl

AFP
Wednesday, Nov 17, 2021

By News Desk

Paris: The International Energy Agency (IEA) on Tuesday upped its average Brent crude oil price assumption for 2022 to $79.40 a barrel, but predicted a rally may ease off as prices that hit a three-year high last month push up global production.

Brent is expected to average $71.50 a barrel this year, it added, in a rarely published take on oil prices. The average annual oil price last broke above $80 in 2014.

Shortages of natural gas and coal have triggered a switch to oil, boosting demand for crude and fuelling a rise in prices.

Last month, the IEA, which advises governments on energy policy, said oil prices were "scaling multi-year highs."

"The world oil market remains tight by all measures, but a reprieve from the price rally could be on the horizon," the Paris-based agency said.

It cautioned however that was not because demand for high-polluting oil was decreasing, "but rather due to rising oil supplies."

Prices had until now risen on the back of a global economic recovery, while supply from producer countries remained tight.

The Paris-based IEA said much of the uptick in supply is due to come from the United States.

A hurricane battered the main US production and export hub in the Gulf coast in late August, but US output made up for half the increase in global oil production last month.

But the IEA said in its monthly report that U.S. production, despite climbing, would not return to pre-pandemic levels until the end of next year. It is due to account for 60 percent of non-OPEC+ supply gains in 2022.

"The world oil market remains tight by all measures, but a reprieve from the price rally could be on the horizon ... due to rising oil supplies," the IEA said.

"Current prices provide a strong incentive to boost (U.S.) activity even as operators stick to capital discipline pledges."

Including price assumptions in monthly reports is rare, but not unprecedented, the IEA said. In its report last month, the IEA's assumption for the average 2022 Brent price was $76.80, while for 2021 it was $70.40. "We publish our price assumptions when we think that this can be useful for the understanding of our forecast," the IEA said in a statement. "As current prices are getting more elevated, they start to have a significant effect on demand."

Oil stored in industry stocks for OECD countries dropped by 51 million barrels in September, and were 250 million barrels below the five-year average and at their lowest since the start of 2015. Preliminary October data pointed to a slight increase.

"Global oil demand is strengthening due to robust gasoline consumption and increasing international travel as more countries re-open their borders," the IEA said.

But it said an uptick in coronavirus cases in Europe, weaker industrial activity and higher oil prices could dent demand. The IEA kept its outlook for oil demand growth largely steady at 5.5 million barrels per day (bpd) for 2021 and 3.4 million bpd next year.