In our January Short-Term Energy Outlook (STEO), we forecast that OPEC petroleum production will increase by nearly 2.7 million barrels per day (b/d) in 2022, the largest year-over-year increase in OPEC production since 2004. This increase in our forecast of crude oil production is largely based on our interpretation of the January 2022 OPEC+ meeting, when participants reaffirmed their decision to continue to increase output by 0.4 million b/d each month until all of the production cuts are reversed. We expect that recent production disruptions in Libya will be more than offset by production increases from other OPEC members.
Libya’s crude oil production averaged nearly 1.2 million b/d during 2021. In late December 2021, armed militants shut in an estimated 370,000 b/d from the four key oil fields in the southwestern part of the country. We estimate that 0.4 million b/d of crude oil production went offline in Libya in late December 2021. This unplanned outage contributed to the increase in the Brent crude oil spot price to $90 per barrel (b), as of January 19, 2022, which was $16/b more than the December average. This January daily high was the first time the Brent crude oil price had reached $90/b since October 2014. Heightened political risk following the delay in Libya’s presidential and parliamentary elections (which were scheduled for December 24, 2021) continues to create uncertainty. In addition, ongoing maintenance on the country’s aging infrastructure also continues to limit oil production in Libya.
As a result of this disruption in Libya, we estimate that unplanned outages in OPEC countries increased to 2.2 million b/d in December 2021. Our forecast assumes that the sanctions that are constraining petroleum exports from Iran and Venezuela will remain in place through the end of 2023.
Despite the recent increase in unplanned outages, we estimate that OPEC members still have more surplus production capacity than they have had on average in the past. OPEC’s surplus crude oil production capacity increased to nearly 9 million b/d in mid-2020 as the onset of the COVID-19 pandemic greatly reduced demand, causing producers to lower output. OPEC’s surplus capacity has fallen since then and most recently averaged 4.6 million b/d in December 2021. We forecast OPEC crude oil production will increase by 2.5 million b/d to an average of 28.8 million b/d in 2022.
Principal contributor: Sean Hill