Global Oil Supply Set to Surpass Demand Despite Omicron as US Producers Boost Output

Global crude oil production is forecasted to outpace demand beginning in December and into 2022, a key monthly industry report said.

The oil supply is expected to receive a boost from producers in the U.S., Canada and Brazil which are set to pump at their highest levels ever, increasing non-OPEC+ output by 1.8 million barrels per day in 2022, according to the report published Tuesday by the Paris-based International Energy Agency (IEA). Global oil supply is also expected to increase despite the outbreak of the Omicron variant of COVID-19 which caused uncertainty in the oil market at the end of November.

“The oil market appears to stand on a better footing than it has for some time,” the IEA report stated. “Much needed relief for tight markets is on the way, with world oil supply set to overtake demand starting this month.”

“The emergence of the Covid-19 Omicron variant at the end of November sparked a steep sell-off in oil, but initial pessimism has now given way to a more measured response,” the report said.

Overall supply could surge by 6.4 million barrels per day in Saudi Arabia and Russia if the OPEC+ parties continue to reverse pandemic-era cuts, the IEA said. In 2021, the supply increased by 1.5 million barrels per day as the world’s economy slowly recovered from the 2020 coronavirus outbreak.

Crude oil supply is projected to increase by 3.3 million barrels per day in 2023, returning to the pre-pandemic total output level of 99.5 million barrels per day, according to the organization.

“For a second month running, the biggest single increase came from the US, where drilling activity is picking up,” the IEA report added.

Increasing global supply would lead to lower crude oil and, therefore, gasoline prices for consumers, The New York Times reported. Prices at the pump are largely tied to the price of crude oil.

The average price of gasoline in the U.S. dropped to $3.32 per gallon on Tuesday, according to AAA data. Gas prices have dropped in recent weeks due to Omicron concerns but they remain near seven-year highs.