Despite U.S. led strategic crude releases, a Reuters poll showed on Tuesday that a COVID 19 resurgence could loom large over the outlook, as OPEC keeps a tight leash on supply, but a COVID 19 resurgence is fuelled by the Omicron variant.
A survey of 39 economists and analysts kicked off before Omicron grabbed headlines -- Brent crude rose to average $71.25 a barrel in 2021, up from the $70.89 consensus in October and the $70.57 average this year. The 2022 Brent outlook was raised to $75.33 from $74.04.
This is the highest projection for the benchmark this year.
John Paisie, president of Stratas Advisors, said that the OPEC will remain cautious in adding barrels, but does not want oil prices to move past $80 for any sustained period of time.
The OPEC is worried about shale producers in the U.S. ramping up production in response to higher prices. The U.S. crude was expected to average $68.52 and $73.31 a barrel in 2021 and 2022, versus October's $68.62 and $71.21 consensus.
Demand was growing by 4.5 million barrels per day bpd in 2021 and by 3.3 million barrels per day bpd next year, led by Asia.
Concerns over Omicron and the release of stockpiles by the United States and other nations have posed headwinds for oil prices as they retreat from recent highs. O R the Organization of the Petroleum Exporting Countries and allies, a group known as OPEC, will meet this week to assess the Omicron variant's impact and determine whether to change its plan to increase output by 400,000 barrels per day in January and beyond.
A number of analysts said that while OPEC could rein in a ramp-up in output in response to the stockpile releases, rising coronaviruses and potential U.S. shale growth could also affect prices next year.
Morgan Stanley has cut its first quarter 2022 Brent crude price forecast to $82.50 per barrel from $95, stating that the Omicron variant creates a downside risk to its demand forecast.