The global economy recovered strongly in 2021, supported by unprecedented fiscal and monetary stimulus in major economies, pent-up demand and increased investments. World GDP growth is estimated at 5.5% in 2021 and is forecast at 4.2% in 2022.
However, numerous challenges have emerged during the year, as the recovery was increasingly divergent among and within major economies.
Moreover, ongoing supply-chain issues, in combination with continued tight labour markets have led to rising core-inflation in some major economies. While some inflationary factors may qualify as temporary, the rise in wages and salaries in affected economies may turn out to be of a more sustained nature. Given the solid economic growth levels in most western economies, the unprecedented monetary stimulus may gradually be reduced in the short-term. This could potentially lead to additional challenges for highly indebted emerging economies, with foreign currency debt.
Global oil demand growth is estimated to have rebounded by 5.7 mb/d y-o-y in 2021. The non-OECD region increased 3.2 mb/d, while the OECD is estimated to have added 2.5 mb/d. This increase is driven by a steady rebound in economic activities and improved transportation fuel consumption, despite a resurgence in COVID-19 cases and containment measures.
In 2022, world oil demand is forecast to increase by 4.2 mb/d, y-o-y, given improved COVID-19 management and rising vaccination rates, enabling economic activity and mobility to return to pre- pandemic levels, supporting transportation fuels in particular. OECD oil demand is forecast to grow by 1.8 mb/d in 2022, while the non-OECD region is projected to increase by 2.3 mb/d, supported by steady momentum in economic activities, particularly China, India and Other Asia. Meanwhile, as vaccination rates increase, the impact of the Omicron variant is projected to be mild and short-lived.
On the supply side, non-OPEC growth in 2021 is estimated at 0.7 mb/d, impacted by major production outages in 2H21, due to weather and accidents, prolonged and unforeseen maintenance, as well as COVID-19-related safety measures in offshore platforms and drilling areas. On the other hand, non-OPEC participants in the Declaration of Cooperation (DoC) continue to return their planned volumes to the market. The main drivers of growth in 2021 for non-OPEC supply are estimated to have been Canada, Russia, and China.
In 2022, non-OPEC supply is projected to see robust growth of 3.0 mb/d, y-o-y, on the back of an expected gradual increase in drilling and completion activities in the US, leading to expected growth of 0.6 mb/d for US tight oil output. The US and Russia are forecast to contribute two thirds of total expected growth, followed by Brazil, Canada, Kazakhstan, Norway, and Guyana. However, investment in the non-OPEC upstream sector in 2021 and 2022 is estimated at around $350 billion each, showing a 50% drop compared to the 2014 level, and thereby limiting growth potential.
While the expected recovery in 2021 was surrounded with challenges, some of these are expected to continue into the next year. The expected market balance continues to be determined by the evolution of the COVID- 19 pandemic, as a key factor of uncertainty, but the successful joint efforts of the DoC continue to closely monitor all developments in a timely and vigilant manner, to be able to react to rapidly changing market circumstances.
Source: OPEC