This call is based on the EIA’s projections that global oil production will grow faster than demand over the next year, especially given the emergence of the Omicron variant. It would be a reversal from the past 18 months, when production has been slow to meet growing demand as the world reopens from Covid-19.
The EIA, which is an arm of the Department of Energy, cited the risks of the new variant affecting global energy consumption and expectations of greater supply from OPEC +, US companies. shale oil and other major producers.
The agency also highlighted the impact of the US-led intervention in energy markets, highlighted by the largest release of barrels on record from the US strategic oil reserve.
Brent oil, the main driver of prices at the pump, is expected to average $ 70 per barrel in 2020. This is down from the average of $ 84 in October and $ 81 in November.
In November, gasoline prices were on average $ 3.39 nationwide – the highest level since September 2014, according to the EIA. But the agency expects that average to drop to $ 3.13 a gallon in December and continue to decline next year.
Citing new travel restrictions imposed in the wake of Omicron’s emergence, the EIA has downgraded its oil consumption forecast for the fourth quarter of this year and the first quarter of next year.
“The potential effects of the spread of this variant are uncertain, which introduces downside risks to forecasts for global oil consumption, particularly for jet fuel,” the EIA said.
Oil prices collapsed after Thanksgiving, with investors worried Omicron could derail soaring energy demand. However, the crude has since rebounded amid anecdotal evidence of milder Omicron symptoms.
The EIA recognized the great uncertainty surrounding the health crisis.
“It’s a very complicated environment for the entire energy industry,” Steve Nalley, EIA interim administrator, said in a statement. “Our forecasts for the prices, consumption and production of oil and other energies could change significantly as we learn more about how the responses to the Omicron variant might affect the demand for oil and the economy in general. “