In the depths of the COVID-19 pandemic, as the list of climate disasters grew and leaders were pitching a green take on infrastructure spending, it appeared for a moment that peak global oil demand might be arriving sooner than many had predicted. Subsequent events went far in dispelling any such notion however, namely a year-long rally in oil prices and severe energy disruptions in China and Europe, both of which were exacerbated by the volatility of renewables-based power generation. Will 2022 resemble the energy market of years past, or will the green revolution be arriving fashionably late?

Outlook

As has been the case since the dawn of 2020, the story of energy markets in 2022 will be the story of COVID-19, that of omicron and any future variant that appears down the line. Here the news may actually be good for oil markets with regard to omicron, which displays some milder characteristics vis-a-vis the delta variant and has already peaked in early hotspots like South Africa, suggesting a negative outlook over the first two months of the year followed by a surge in demand as consumers activate their long-delayed travel plans and governments worldwide implement supply-side stimulus. Moreover, it’s likely that the omicron dip won’t be overly precipitous, as suggested by strong prices to close out the New Year, with traders seemingly already having made up their minds on omicron’s muted impact to the global economy.

Another potential demand shock could come from China, as the world’s second-largest economy is facing a myriad of economic challenges to begin the year.

Overall, the IEA predicts that demand increased by 5.4 million barrels per day (mb/d) in 2021, and will increase by another 3.3 mb/d next year, at which point it will hit the pre-COVID level of 99.5 mb/d. OPEC foresees a 4.15 mb/d increase in demand over 2022.