- Brent is trading c. $91/bbl at the end of January, a full $20/bbl above mid-December levels as volatility in oil continues
- The relatively benign economic effects of the omicron variant have removed the risk applied to prices after the variant's discovery
- Meanwhile, the threat of Western sanctions if Russia invades Ukraine and a Houthi attack on the UAE add a political risk premium
- Several banks see Brent reaching $100/bbl by 2H22 on the back of rising geopolitical risks, a robust demand recovery and falling OPEC spare capacity
- OPEC's African members continue to struggle to produce at quota, and Russia is likely to face a similar situation soon
- However, OPEC+ is currently unlikely to deviate from its existing schedule, with the group suggesting that current higher prices are detached from fundamentals
- We estimate 2021 global demand growth to have been 5.09 million b/d (-450,000 b/d on previous), while we see 3.7 million b/d for 2022, bringing global demand above 2019 levels
- We see the market in deficit by 1.58 million b/d in 2021, while a surplus of 570,000 b/d will occur in 2022 if OPEC+...
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by Graham Walker // 28 January, 2022
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