IEA predicts oil demand to fall in 2022 due to new COVID variant omicron

The global oil demand is set to fall in 2022, says the International Energy Agency which revised its outlook to 100,000 barrels per day, due to the emergence of the new COVID variant omicron. The new variant has already prompted governments to impose new restrictions on international travel.

However, the IEA says recovery in the post COVID world will not be completely derailed. Its report highlighted that production is poised to outpace demand, with increased output from the US and OPEC+ countries, from December. The IEA forecasts Canada, US and Brazil to pump their highest annual levels ever.

“The surge in new COVID-19 cases is expected to temporarily slow, but not upend, the recovery in oil demand that is underway, said the Paris-based IEA. “New containment measures put in place to halt the spread of the virus are likely to have a more muted impact on the economy versus previous COVID waves.”

The IEA said demand for fuels used in road transportation and petrochemical feedstock will continue to rise steeply. The agency’s predictions comes a day after OPEC kept its own outlook for 2021 and 2022 unchanged. OPEC believes the impact of the omicron variant on demand will be mild and short-lived.

The Organization of the Petroleum Exporting Countries, in its report, said global oil demand will be average 99.13 million barrels per day in Q1 2022, up 1.11 million bpd from its forecast last month. “Some of the recovery previously expected in the fourth quarter of 2021 has been shifted to the first quarter of 2022, followed by a more steady recovery throughout the second half of 2022.”

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Furthermore, it maintains its forecast of world oil demand to grow by 4.15 million bpd in 2022. OPEC had kept this year’s growth forecast unchanged.