EIA forecasts OPEC production will grow significantly in 2022

The US Energy Information Administration (EIA) forecasts that OPEC production will increase nearly 2.7mn b/d in 2022 – the largest year-on-year increase in OPEC production since 2004.

The Short-term Energy Outlook forecast is based on the decision by OPEC+ participants at their January 2022 meeting to continue to increase output by 0.4mn b/d each month until all of the production cuts are reversed. Recent disruptions in Libya are expected to be ‘more than offset’ by production increases from other OPEC members.

Libya’s crude oil production averaged about 1.2mn b/d during 2021. And in late December 2021, armed militants shut-in an estimated 370,000 b/d from four key oil fields in the south-western part of the country, putting an estimated 0.4mn b/d offline.

The unplanned outage contributed to the rise in Brent crude oil to $90/b as of 19 January 2022 – $16/b higher than the December 2021 average, and the first time Brent crude has reached this level since October 2014.

Delay in Libya’s presidential and parliamentary elections continues to create uncertainty. In addition, ongoing maintenance on the country’s ageing infrastructure also continues to limit oil production in Libya.

The EIA forecast also assumes that the sanctions that are constraining petroleum exports from Iran and Venezuela will remain in place through to the end of 2023.