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What awaits the oil market in the new year


January, 03 2022
watermark Economic news

During the first trading day of the new year, the oil market demonstrates a multidirectional movement, first continuing the decline that began at the end of the past year, and then sharply jumping up. The current Brent quote is $78, WTI oil is trading at $75.38 per barrel. 


The pressure on prices is exerted by the continuing concern of the market about the fall in demand due to the new strain of the omicron coronavirus. At the same time, analysts note that due to mass vaccination in 2021, the threat of Covid in the world has significantly weakened, and by the end of 2021, Brent has grown by 34%, and WTI – by 38%. The growth was mainly due to the gradual lifting of restrictions on air travel and tourism and, accordingly, the growing demand for oil. 


Predicting the movement of the oil market in 2022, analysts note that the periodic appearance of new strains of coronavirus may cause the resumption of lockdowns and restrictions in certain countries and sectors of the economy. Therefore, the oil market situation in the new year will not be too stable, and the market is waiting for sharp price fluctuations.


Another risk for the oil market in 2022 may be an increase in oil production in the United States. According to the IEA forecast, the supply of oil will also increase sharply in Canada and Brazil, and this will mean that there will be an excess supply of oil in the market of 2 million b/d, of which 1.1 million b/d will be for oil production in the United States.


Tomorrow, January 4, a regular meeting of the ministers of the OPEC+ member countries will be held, at which the parameters of the implementation of the current agreement on increasing oil production by 400 thousand barrels per day will be discussed, and quotas for January will also be set. Most likely, they will remain unchanged – the same as in December 2021. However, if the threat of new, more dangerous Covid strains persists, OPEC+ may temporarily suspend production increases due to uncertainty about future oil demand.


For 2022, we predict that the price of Brent oil will move on average in the range of $65-$90 per barrel, and during the first quarter of 2022 – in the range of $69-79 per barrel.


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