U.S. Cuts Oil Demand and Price Forecasts on Omicron Fears
U.S. Cuts Oil Demand and Price Forecasts on Omicron Fears
(Bloomberg) -- The Biden administration’s efforts to lower energy costs may have gotten unexpected help from the latest coronavirus variant.
As a result of travel restrictions following the outbreak of the omicron variant of Covid-19, the Energy Information Administration cut its projections for both global benchmark Brent and U.S. crude futures by nearly $2 a barrel for 2022, according to the Short-Term Energy Outlook. The agency also lowered its outlook for consumption of petroleum and liquid fuels in the fourth quarter and first quarter while raising its forecast for oil output from OPEC+ and the U.S.
The latest forecast comes as the Biden Administration continues to focus on lowering gasoline prices and just after decision from OPEC and its allies to proceed with a scheduled oil-production hike. The producer group left the door open to changing the plan on short notice due to the uncertainty surrounding the impact of the omicron variant of Covid-19 on oil demand. Meanwhile, the U.S. pushed ahead with its planned release of strategic oil in an exchange program for which bids were closed Monday.
The EIA softened its outlook on petroleum and liquid fuels demand by over half a million barrels a day to 99.3 million from its previous forecast for the first quarter. It revised its demand estimate lower for the current quarter as well on rising Covid-19 cases in the last month that prompted renewed mobility restrictions in Austria, Ireland and the Netherlands, and several other guidelines in the rest of Europe.
Globally, output is set to average 100.93 million barrels a day in 2022, leaving the market in a surplus for the year.
The agency now expects Brent to average $70.05 a barrel next year. Its projections for West Texas Intermediate were lowered to $66.42 a barrel, the report said.
Meanwhile, the EIA lowered slightly its crude oil production forecast next year to 11.8 million barrels a day while adjusting it slightly higher for 2021.
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