Recovering oil demand due to eased pandemic-related restrictions and prudent OPEC+ supply policies have helped oil prices recover to pre-pandemic levels, Fitch Ratings says. However, the situation in the oil market remains highly uncertain given the emergence of the Omicron coronavirus variant, which may result in renewed lockdowns and travel restrictions, and may increase price volatility in the near term.

OPEC+ has been the main stabilising factor in the global oil market since the start of the pandemic and is likely to remain so in the near term, but its policies may become less effective over time as some alliance members (e.g. the UAE and Russia) are considering increasing production to monetise their large reserves. We expect US oil production to continue recovering in 2022, although in the near term it is unlikely to materially exceed the levels recorded just before the pandemic.

We anticipate demand will continue to improve in 2022, assuming new lockdowns will be shorter and less severe than those in 2020. The recovery might reverse if Omicron or other potential new variants prove significantly more infectious or dangerous, leading to new prolonged synchronised lockdowns.

We have kept our long-term price assumptions unchanged. We anticipate that the impending energy transition may increasingly affect demand in the global oil market, although significant uncertainty remains.
Source: Fitch Ratings