Global demand for petroleum and crude oil products has grown faster than supply since the third quarter of 2020, resulting in higher crude oil prices and lower inventory levels. The US Energy Information Administration anticipates in its November Short-Term Energy Outlook (STEO) that rising output from OPEC+ nations and the US would result in increased global liquid fuel stockpiles and lower crude oil prices in 2022.
Beginning in the third quarter of 2020, global crude oil consumption would exceed global crude oil output for five consecutive quarters. As per the EIA, the Organization for Economic Cooperation and Development (OECD) regions’ gasoline stockpiles fell by 424 ML barrels, or 13%, over this predicted period. The demand for global crude oil will outstrip worldwide supply through the end of the year, resulting in modest incremental inventory reductions and keeping the Brent crude oil price over $80 per barrel (b) until 2021 December.
However, the EIA predicts that global oil stocks would begin to expand in 2022, owing to growing output from OPEC+ nations and the United States, as well as slower global oil demand growth. According to the EIA, this move would put downward pressure on the Brent price, which is expected to average $72/b in 2022.
Futures markets are also showing high values for short-term contracts in comparison to longer-dated futures, a phenomenon known as backwardation. The disparity between short-term and long-term futures prices is influenced by crude oil inventory levels, among other things. Price differentials between contracts for delivery at later dates and crude oil futures for delivery in the near term imply that the market expects inventory withdrawals to stall.