Oil market quarterly review

Q4 2021

Q4 2021

Executive summary

  • Supply and demand levels are beginning to equalise. This has been facilitated by the recovery and stabilisation of demand during sustainable growth in the global economy and systematic OPEC+ measures to increase the supply. As a result of a lack of significant negative effects from the new Omicron variant, it is expected that a balance will be reached in early 2022, and that a slight surplus will remain throughout 2022.
  • ue to difficulties within the energy transition process, the oil market is gradually recovering. Lack of investment, resource constraints, and difficulties in bringing spare capacity to the market are creating a significant oil price premium. High prices are expected to persist over 2022–2024. The acceleration in inflation, growth in the debt burden (mainly in the US), as well as currency devaluations in a number of developing nations create risks of possible crisis situations in the future – and this can only strengthen the upward price trend.
  • High spot prices have an impact on the medium-term price forecasts for 2022–2024. Such forecasts include price growth up to USD100/bbl, while the median forecast value for the next three years is approx. USD70/bbl. However, experts and investors still see significant risks for the oil market in the long term, including declining demand, an acceleration of the energy transition amid high oil prices, the success of US shale producers, and excess supply. In this regard, prices are expected to decline from the current USD75-80/bbl to around USD65/bbl in 2022 prices (a more balanced cost for new projects). The long-term level rose by USD5/bbl compared to the last quarter, chiefly due to using 2022 and not 2021 prices, to reflect a rise in actual figures, following high inflation in the US in 2021.
  • An analysis of historical oil price dynamics demonstrates that current price levels – and even a rise to USD80-90/bbl – will not create significant issues for the global economy. Factors contributing to this include a significant increase in energy efficiency and high global rates of inflation, which reduce the real price of oil for consumers. The current levels can be compared to averages seen in the past 15 years, and are far from the price peaks that could create issues for consumers.

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