Global crude oil market outlook for 2022 The tight supply situation is likely to continue for many years

At the beginning of the new year, the international crude oil price is hovering at the $80 per barrel mark, where to go? Experts disagree that differences outweigh consensus
.
Several decisive factors can stir the sensitive nerves
of the market at any time.

First of all, the subsequent development of the new crown pneumonia epidemic will ultimately determine the change
in world oil demand.

It is hard to imagine that many countries in the world enter 2022 in a "lying flat" way
.
From Europe to Oceania, from southern Africa to North America, in the face of a sharp rise in the number of virus infections, the so-called "herd immunity" has become a helpless option, and most countries cannot afford to withstand prolonged lockdowns
.

The hope is that the pandemic will end and the world economy will recover, either this year or next year
.
At that time, the demand for oil from retaliatory economic growth will also increase
significantly.

Two years ago, the novel coronavirus spread around the world, the lockdown policy brought the world economy to a standstill, oil demand was hit hard, and oil prices fluctuated
wildly.
With the widespread vaccination of countries and the world economy showing signs of recovery last year, oil demand has also begun to rebound, and oil prices have climbed month by month, far exceeding expectations
.

Most advisory institutions expect oil demand to decline temporarily in the first quarter of 2022 due to the widespread infection of the Omicron strain, but will rebound in the second quarter, and the world economy may recover strongly in the second half of this year, and oil demand will continue to increase
.
According to the Organization of the Petroleum Exporting Countries (OPEC), the impact of Omicron will be "mild and short-lived"; The IEA believes that the demand rebound will temporarily slow due to new changes in the epidemic, but the overall trend will not be reversed
.
Based on the same judgment, Goldman Sachs believes that the spring of the world's energy demand will soon come
.

Oil consumption is expected to rise to 99.
53 million b/d this year from 96.
2 million b/d in 2021, largely returning to pre-pandemic levels
, according to the International Energy Agency.
Some experts are more optimistic in their forecasts, believing that world oil demand will reach record levels this year and maintain strong growth
in the coming years.
For this reason, crude oil prices will also rise
steadily.
Barclays predicts that WTI will average around $77 in 2022, up from last
year's average price of $73 per barrel.
Goldman Sachs believes that if the epidemic is controlled this year and next, oil prices will continue to rise, and the average price of Brent crude oil will reach $
85 per barrel by 2023.

Second, the tight supply of crude oil may continue for many years
.

Due to the recovery of market demand, many people warned at the end of last year that the shortage of oil may lead to an imbalance
between supply and demand.
Since the beginning of winter, the European power crisis has also sounded the alarm for the world
.
The vast majority of forecasts point to further growth in oil demand in the coming years
.
This raises an important question, can crude oil supplies keep up?

Let's take a look at the situation of the three major oil producers one by one
.

One is OPEC
.
According to the statistics of the just released OPEC monthly meeting, OPEC and non-OPEC oil producers complied with the 117% production reduction requirement in November 2021, which means that the actual production capacity is insufficient and even below the monthly production quota
.
Not surprisingly, the OPEC meeting decided to continue raising production by 400,000 barrels per day in February until June
.

According to the U.
S.
Energy Information Administration, OPEC's spare capacity may only be 5.
11 million b/d by the end of 2022, and this figure may fall further below 4 million b/d by the end of 2023, which is significantly less
than the 9 million b/d in the first quarter of 2021.
Bloomberg expects real crude oil supply from OPEC and non-OPEC producers to increase by 1.
4 million b/d in the first quarter of 2022, significantly lower than its original forecast
of 1.
7 million b/d.

The second is the United States
.
Daniel Yergin, a well-known oil expert, believes that U.
S.
crude oil production may increase by nearly 1 million barrels this year, and shale oil production is recovering, but it is difficult to return to its previous
highs.
Currently, U.
S.
crude oil production is about 2 million barrels down from the record level of 13 million barrels per day in early 2020, while crude inventories have also fallen by nearly 70 million barrels
over the same period.
Both the Biden administration's anti-fossil fuel stance and aggressive green agenda will constrain further oil and gas development
for the foreseeable future.
According to data, capital spending by 27 major U.
S.
oil producers fell to $111 billion last year, a decrease of nearly six percent
.
Capital spending is expected to reach around $135 billion in 2023, less than half
of 2014 levels.

The third is Russia
.
According to Rosneft, Russia's total crude oil production in 2021 was about 10.
9 million barrels per day, which is already very close to crude oil production capacity, and there is basically no room for increased production
.
Russian Oil Minister Alexander Novak said that by May 2022, Russian crude oil production will rise back to 11.
33 million barrels per day
.
Even so, it is difficult to change the downward trend
.

In addition, oil producers such as Canada, Norway, Guyana and Brazil may try to bridge the gap between supply and demand, but to little effect
.

Third, investment preferences will affect the ups and downs
of oil prices.
The global energy transition is already inevitable, although difficulties such as rising costs are likely to be very prominent
this year.
But there is no turning back, and the pursuit of green energy will not stop
.

Renewable energy is poised for record growth
.
However, if world commodity prices remain high, especially oil and gas prices, it will seriously affect the development and popularization
of clean energy such as wind power and solar energy (9.
910, -0.
05, -0.
50%).
In its 2021 Market Report, the IEA said rising input costs, wages, supply chain and logistics burdens could hinder the diffusion and development
of a range of low-carbon technologies.
The world still needs to double its clean energy capacity by 2050 to achieve net-zero emissions
.

At the same time, as investors continue to pursue ESG concepts, investment in the traditional fossil sector will continue to decrease
.
Not only are oil companies under pressure to protect the environment and low carbon, but investment banks are also working to reduce their carbon footprint
.
Some large investment funds are eager to demonstrate green capabilities
by eschewing new oil and gas projects.

Wall Street speculators, though, don't take public feelings
into account.
It is now almost overwhelmingly expected that oil prices will continue to rise
.
Saudi Energy Minister Mohammed Salman warned that underinvestment could lead to an "oil supply crisis" and continue to push up oil prices
.
Goldman Sachs believes that the possibility of oil prices reaching $100 per barrel by 2023 should not be ruled out, because supply cannot keep up with demand, and the average price of Brent crude oil is expected to remain at $
85 per barrel in 2022 and 2023.
JPMorgan Chase & Co.
boldly predicts that oil prices may soar to $125 a barrel this year and $150 a barrel in 2023
.

Finally, an issue that cannot be ignored is the outcome of
the Iranian nuclear negotiations.
Whether Iran will get the freedom to export crude oil as it wants is unknown
.
If the Iranian nuclear agreement collapses, the possibility of major geopolitical turmoil cannot be ruled out, which obviously deserves the close attention
of oil market participants.
If the US partially lifts sanctions, the impact of increased Iranian crude oil inflows on global oil prices will be significant against the backdrop of uncertain demand in the coming months
.

Iran sits on the world's fourth-largest crude oil reserves and has amazing
potential.
The Iranian government previously announced that it will increase production in the South Azadegan field from the current 140,000 barrels per day to at least 320,000 barrels per day by mid-2023, thus achieving its target
of 1 million barrels per day.
As of October 2021, Iraqi crude oil production was close to 2.
4 million barrels per day, of which 1.
7 million barrels to 1.
8 million barrels were used in domestic refineries
.

In the 70s, Iran's crude oil production reached 5 million barrels
per day.
If sanctions are lifted, Iran's oil exports will increase by 700,000 bpd
starting in March 2022.
Observers believe that the resumption of Iranian oil exports will have an impact, and its direct impact is that oil prices have plunged by 10%.

There are many
uncertainties that have dominated the oil market this year.
We don't know when the epidemic will end, or if there will be new virus variants that will disrupt the economic and social order
again and again.
Therefore, we need to be prepared for a sharp increase in the cost of living due to a possible collapse in oil prices, and we should not panic about a sudden collapse in oil prices
.
For now, crude oil price expectations range from averaging around $70 a barrel to hitting highs above $100 a barrel sometime this year and next
.
The only thing that is clear is that the "black gold era" has come to an end, and the pace of green economy will accelerate
in the new year.