Opec+ JTC trims global oil surplus forecast for 2022

The Opec+ group's Joint Technical Committee (JTC) sees a slightly tighter oil market this year than previously expected, trimming 100,000 b/d from its projected supply surplus for 2022.

The committee — which met today to study market fundamentals ahead of tomorrow's Opec+ ministerial meeting — has cut its base case assumption for global oversupply to 1.3mn b/d this year, down from 1.4mn b/d previously, according to an internal document seen by Argus. The base case retains a 1.4mn b/d average surplus in January-March, but the outlook for the second, third and fourth quarters has been revised to a surplus of 1.7mn b/d, 1.2mn b/d and 1.1mn b/d, respectively. The previous JTC document from last month had forecast a respective surplus of 1.8mn b/d, 1.1mn b/d and 1.5mn b/d for those periods.

The JTC's base case has global oil demand surpassing pre-Covid levels in the second half of 2022, with consumption increasing by 4.2mn b/d compared with 2021 to average 100.8mn b/d this year, in line with the forecast in Opec's most recent Monthly Oil Market Report (MOMR).

All three of the JTC's scenarios assume that key consumer countries will release 40mn bl of crude from strategic petroleum reserves in the first half of this year, and that 13.3mn bl will be returned to the US Strategic Petroleum Reserve (SPR) in the third quarter. Under the JTC's base case, OECD commercial oil stocks sit 134mn bl below the 2015-19 average in the first quarter, 97mn bl under in the second quarter, 66mn bl under in the third quarter, and 20mn bl above the 2015-19 average by the end of the fourth quarter.

The committee's report warns about uncertainties related to the impact of the Omicron variant, ongoing supply chain bottlenecks, central bank policy action to tackle inflation, "growing capacity strains from underinvestment in the oil industry", high sovereign debt levels in many regions and geopolitical risks. But the impact of potential sanctions affecting Russian energy exports was not discussed at today's JTC meeting, according to one delegate.

Two Opec+ delegates told Argus they find it is highly probable that the group will press ahead with another monthly quota increase of 400,000 b/d for March, and will not be spurred into a bigger hike by the recent rally in oil prices.

The JTC assessed that the Opec+ group's crude production fell 635,000 b/d short of its December target, leaving average compliance at 122pc last month. It commended Equatorial Guinea for making up for previous overproduction with additional cuts, and even though the group as a whole is struggling to meet its monthly output targets, it urged countries that have failed to fully compensate for past overproduction to submit plans to do so.

By Ruxandra Iordache and Nader Itayim