Oil Prices Bullish as 2022 Market Outlook Remains Positive

Oil prices remained bullish on Monday rising above $79 per barrel, spurred mainly by tight supply and hopes that demand would further recover in 2022 as well as the shutting down of a 200,000 barrels per day asset in Libya for maintenance.

This is just as the Organisation of Petroleum Exporting Countries (OPEC) yesterday appointed a former Kuwaiti Governor, Haitham al-Ghais as its new Secretary General to succeed Nigeria’s Sanusi Barkindo, whose tenure expires at the end of July this year.

OPEC and its allies known as OPEC+ are expected to on Tuesday sanction an output increase by 400,000 barrels like it has done since August last year.

OPEC+ has been gradually unwinding record oil production cuts of 10 million barrels per day (bpd), about 10 per cent of global oil output and would be left with about 3.4 million barrels at the end of January.

But while the group has been raising its targets, its production increases have not kept pace as some members like Nigeria have struggled with capacity constraints.

In November, OPEC+ oil producers missed their production targets by 650,000 bpd and 730,000 bpd in October, the International Energy Agency (IEA) disclosed in a document last month.

Brent crude rose 39 cents, or 0.5 per cent, to $78.17 a barrel in the afternoon, but had earlier risen as high as $79.05.

On the other hand, the United State’s West Texas Intermediate (WTI) crude grew by 0.80 per cent, to hit $75.84 at about 5pm Nigerian time on Monday.

The increase further gained some support from an outage in Libya which would see output cut by 200,000 barrels per day for a week due to pipeline maintenance.

Last year, Brent rose 50 per cent, spurred by the global recovery from the COVID-19 pandemic and OPEC+ supply cuts, even as infections reached record highs worldwide.

There might also be no surprises today as OPEC+ was expected to stick to its plans to increase output in February during its meeting, seeing a mild and short-lived impact on demand from the Omicron coronavirus variant.

Speaking during the 58th conference of the Joint Technical Committee (JTC), a precursor to today’s decisive meeting, Barkindo noted that the pandemic was far from over, and that OPEC needs to remain highly nimble and adaptable to the constantly changing situation.

Sharing the secretariat’s latest outlook for the oil market, he stated that despite the steady progress that had been made in terms of the economic recovery, OPEC expects significant levels of uncertainty in the weeks to come, which could slow the growth momentum.

“Looking at demand, we foresee world oil demand increasing by 5.7 mb/d in 2021 and by 4.2 mb/d, both unchanged from last month. World total demand in 2021 is now pegged at 96.5 mb/d and at 100.6 mb/d in 2022, surpassing pre-pandemic levels.

“Some of the recovery previously expected in 4Q21 has now shifted to 1Q22, followed by a more steady recovery throughout 2H22, though risks are skewed towards the downside.

“In terms of the supply side, non-OPEC supply in 2021 is expected to grow by 700,000 b/d to average 63.7 mb/d, unchanged from last month. For 2022, non-OPEC supply growth is forecast at 3.0 mb/d for an average of 66.7 mb/d, also unchanged from last month,” he said.

In a separate congratulatory message to his successor-in-waiting, who was picked by acclamation, Barkindo noted that it was fully deserved and a recognition of the al-Ghais’ “extremely positive standing within the OPEC community as a committed, knowledgeable and extremely able technocrat who can lead the organisation in the years to come.”

Barkindo described it as an honour of a lifetime to lead OPEC since August 2016, helping bring together the, ‘Declaration of Cooperation’, the ‘Charter of Cooperation’, and navigate the organisation past the impacts of the industry downturn of 2014-2016 and the massive repercussions of the Covid-19 pandemic in 2020 and 2021.

“With your appointment, this vital international organisation for our member countries, as well as the global oil market, is in very capable hands,” he said in a letter to the new OPEC head who will be formally inaugurated in August.

Earlier, a special meeting of the conference of OPEC appointed al-Ghais, a veteran of the Kuwait Petroleum Corporation (KPC) and Kuwait’s OPEC Governor from 2017 to June 2021 and currently serving as Deputy Managing Director for International Marketing at KPC as the secretary general.

Al-Ghais was also chair of the JTC of the Declaration of Cooperation (DoC) in 2017 and subsequently served as a member of the JTC until June 2021.

In its decision, the conference expressed its appreciation to Barkindo for his leadership during his two-term tenure as secretary general beginning on 1 August 2016 and ending on 31 July 2022.

“A long-serving veteran of Nigeria’s oil industry and OPEC, Barkindo had been instrumental in expanding OPEC’s historical efforts to support sustainable oil market stability through enhanced dialogue and cooperation with many energy stakeholders, including the landmark DoC since its inception in December 2016.

“These efforts are widely credited with helping to stabilise the global oil market since the unprecedented market downturn related to the COVID-19 pandemic, and providing a platform for recovery,” OPEC members said in a tribute to the organisation’s current head.

Emmanuel Addeh in Abuja and Peter Uzoho in Lagos

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