The oil market will move towards balance in 2022

Significance

The rebound in demand from the pandemic slump should keep the market in deficit, supporting current price levels. However, in 2022, demand growth is expected to slow, while supply from non-OPEC+ producers will accelerate. A potential return of Iranian oil exports and further pandemic reversals remain major downside risks.

Impacts

• Forecasts suggest a return to normality in 2022, but discontinuities with the past remain powerful forces reshaping global energy markets.
• If pandemic concerns recede, energy transition impacts will move to the fore.
• Non-OPEC supply growth plus expectations of more muted demand increases mean OPEC will still have a 'free rider' problem to address.
• Oil services companies’ prospects should improve but margins will remain thin.