IN 2022, S&P Global Platts Analytics expects supply to catch up and even exceed demand growth highlighted by an increase in LNG exports, a rebound in US shale oil, gas and NGLs and the return of investment in non-OPEC production.
Prices will begin to normalize as inventories recover. Amid this process, we expect to see a greater divergence between oil and gas prices as oil starts to rebalance in the first quarter, while gas markets will remain tighter longer. Any disruption in global supply chains will also have outsized influence on prices. While oil prices have recently corrected downward, the key test will come in the third quarter as summer demand challenges supply resilience – the absence of an Iran deal could leave the market vulnerable to breaking $100 per barrel if combined with any other disruptive event.
Generally, low inventories and fears of supply inadequacy over the Northern Hemisphere winter expose prices to extensive upside risk in the first quarter, particularly natural gas prices. In 2022, energy supply will grow faster, not only to catch up to 2021 demand, but also to cover additional demand growth in 2022 and to rebuild depleted inventories. While this will be a difficult lift for the supply side under normal circumstances, several key commodities and markets face considerable geopolitical risks to supply growth.
Even with Iranian barrels coming back, oil markets will need more supply from the rest of OPEC by mid-year. If Iranian oil does not come back to the market, OPEC capacity will be pushed to the limit. Tensions in the Middle East will only worsen with a defiant Iran. The lack of an Iran deal, if coupled with supply interruptions elsewhere, could see oil prices test $100/b.
Oil demand growth could exceed 6 million b/d if we revert to normal more quickly. The strength in demand will push refinery runs and utilization rates close to their historical ranges, improving margins. 6) Three to five North American LNG liquefaction projects will make final investment decisions after a two-year hiatus.
Global coal demand is expected to increase again in 2022 as developing markets, China and India in particular, will need additional energy supply from coal to meet incremental energy demand growth.