- Russia's invasion of Ukraine sent Brent to $105/bbl. It trades now at c. $103/bbl after the imposition of sanctions, with the prospect of high prices for the foreseeable future
- We forecast global demand growth of 3.55 million b/d for 2022 (-150,000 b/d on previous), with demand finally exceeding 2019's level
- Inflation remains a downside risk, running above 7% in the US currently, while China's zero tolerance policy on COVID has also impacted its growth
- We forecast global supply growth of 5.81 million b/d in 2022(-40,000 b/d on previous), based on OPEC+ sticking to its scheduled unwind of its cuts deal
- The meeting of March 2nd is likely to see the group maintain its schedule, with the Ukraine situation only potentially impacting policy if Russian production is materially affected
- In such a case, Saudi Arabia's instinct to stabilise the market by covering lost production would have to be tempered by avoiding being seen to take Russia's market share
- Major oil companies have booked high free cash flow, with capex remaining low and prices high. But much of the windfall is being returned to shareholders
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by Graham Walker // 1 March, 2022
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