Brent Oil to hover around $76 over 2022 – ING

Oil has had a strong year. Both non-OPEC and OPEC supplies are expected to grow next year pushing the market back into surplus. However, for now, the biggest downside risk remains covid, as strategists at ING note.

Back to surplus for oil

“Given the continued unwinding of OPEC+ supply cuts, along with strong non-OPEC supply growth, the global oil market could return to surplus as soon as the first quarter of next year. This should keep the market from trading back towards the recent highs we have seen in 2021. The bulk of the surplus is estimated in 2Q22, which suggests that this is where we could see some downward pressure on prices.”

“We expect that ICE Brent will average US$76/bbl over 2022. Longer-term concerns over the lack of investment in upstream oil and falling OPEC spare capacity next year (as the group eases cuts) will likely put a floor under the market.”  

”Clearly, the largest downside risk is further Covid related restrictions going into 2022 which could hit oil demand.”

“The upside risks include falling OPEC capacity, US oil growth falling short of expectations and Iranian supply remaining flat over 2022. We currently expect that Iranian flows will trend higher through the year. However, for that to happen, we need to see a breakthrough in Iranian nuclear talks.”