Ashitha Shivaprasad

(Reuters) – Oil analysts are lowering their prices forecasts for 2022 because the Omicron coronavirus variation poses headwinds to fuel recovery and risks a glut in supply as oil producers pump more, a Reuters poll revealed on Friday.

According to a survey, 35 analysts and economists forecasted that the average barrel price would be $73.57 per barrel by 2022. This is about 2.2% less than the November consensus of $75.33. The 2022 forecast price has fallen for the first time since the August poll.

The average price of a barrel is estimated to reach $71.38 in 2022, which compares with the $73.31 consensus for the month before. [O/R]

“With oil demand growth slowing, supply growth persisting, and the energy crunch easing, we see the oil market balance expanding rather than shrinking in 2022 and thus expect prices to trend lower from today’s levels,” said Julius Baer analyst Norbert Rücker.

Benchmark Brent crude oils, which are now trading at around $80/barrel, will experience their highest annual increase since 2009. It is due to increased fuel demand.

The Omicron coronavirus variant is now spreading more quickly, prompting countries to increase restrictions. It could cause oil demand to decline if curbs are not lifted.

Global reopening will increase once Omicron surge passes, according to Edward Moya. OANDA’s senior market analyst said that prices for oil will remain volatile due to OPEC+ keeping traders on edge as they gradually raise their production.

After agreeing to increase output by 400,000 barrels per hour per month, the Organization of the Petroleum Exporting Countries (or OPEC+) will hold a meeting on January 4th.

Suvro Sarkar, DBS Bank analyst, stated that while OPEC+ strategy and U.S.-Iran nuke talks will play a role on the supply side, they will not be as important on the demand side.

In 2022, demand was expected to grow by between 3.2 and 6.0 million barrels per hour (bpd).