Oil prices could reduce in coming months with possible spike later

Crude oil prices could soften in the coming months as looming oversupply is turning oil producers' fortunes around, according to industry institutions and analysts, reported Xinhua.

Meanwhile, a possible failure to revive the Iran nuclear deal by the first quarter of 2022 together with expected return of oil demand in the summer of next year could result in a spike of oil prices.

While supply shortage in the second half of 2021 drove up the prices of oil, natural gas and coal in many parts of the world, supply is surpassing demand in the global oil market leading to a buildup of inventories.

Global oil production is poised to outpace demand from December of 2021, led by growth in the United States and the Organization of the Petroleum Exporting Countries (OPEC) and its partnering oil producing countries, said a monthly oil market report recently issued by the International Energy Agency (IEA).

Global crude oil supply could increase by as much as 6.4 million barrels per day in 2022, up from a rise of 1.5 million barrels per day in 2021, while global oil demand is projected to expand 3.3 million barrels per day in 2022, in comparison with 5.4 million barrels per day of growth in 2021, according to the IEA.

Analysts with S&P Global Platts Analytics expected supply to catch up and even exceed demand growth in 2022, highlighted by an increase in exports of liquefied natural gas (LNG), higher output of shale oil, natural gas and natural gas liquid in the United States and the return of investment in non-OPEC production.

Oil prices would start to rebalance and normalize in the first quarter of 2022 as inventories recover, according to S&P Global Platts Analytics.

"For 2022 as a whole, we expect that growth in production from OPEC Plus, of U.S. tight oil, and from other non-OPEC countries will outpace slowing growth in global oil consumption, especially in light of renewed concerns about COVID-19 variants," said a short-term energy outlook for December recently issued by the U.S. Energy Information Administration (EIA).

In reality, crude oil futures prices have witnessed substantial correction since early November due to the decision to release crude oil stocks in a few major oil consuming countries and warmer-than-expected winter in the Northern Hemisphere so far.

Brent crude oil futures prices will average 70 U.S. dollars per barrel in 2022, according to the forecast by the EIA.

The ceiling of oil prices depends on real demand and oil prices would continue to fluctuate at around 80 U.S. dollars per barrel in 2022, according to Ji Mo, chief China economist with Fidelity International.

Oil prices will remain volatile in the near term as investors assess the latest news on the new COVID-19 variant Omicron, said analysts with UBS Global Wealth Management in a recent report.

UBS reiterated its positive outlook for oil banking on continuous growth of global oil demand in 2022 and the flexibility of OPEC Plus in unwinding its production cut deal.

Oil prices would start to rebalance and normalize in the first quarter of 2022 as inventories recover, according to S&P Global Platts Analytics.

"For 2022 as a whole, we expect that growth in production from OPEC Plus, of U.S. tight oil, and from other non-OPEC countries will outpace slowing growth in global oil consumption, especially in light of renewed concerns about COVID-19 variants," said a short-term energy outlook for December recently issued by the U.S. Energy Information Administration (EIA).

In reality, crude oil futures prices have witnessed substantial correction since early November due to the decision to release crude oil stocks in a few major oil consuming countries and warmer-than-expected winter in the Northern Hemisphere so far.

Brent crude oil futures prices will average 70 U.S. dollars per barrel in 2022, according to the forecast by the EIA.

The ceiling of oil prices depends on real demand and oil prices would continue to fluctuate at around 80 U.S. dollars per barrel in 2022, according to Ji Mo, chief China economist with Fidelity International.

Oil prices will remain volatile in the near term as investors assess the latest news on the new COVID-19 variant Omicron, said analysts with UBS Global Wealth Management in a recent report.

UBS reiterated its positive outlook for oil banking on continuous growth of global oil demand in 2022 and the flexibility of OPEC Plus in unwinding its production cut deal.