In its January Short-Term Energy Outlook (STEO), the EIA forecasts that OPEC petroleum production will increase by nearly 2.7 million bpd in 2022, the largest y/y increase in OPEC production since 2004. This increase in our forecast of crude oil production is largely based on its interpretation of the January 2022 OPEC+ meeting, when participants reaffirmed their decision to continue to increase output by 0.4 million bpd each month until all of the production cuts are reversed. It is expected 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 bpd during 2021. In late December 2021, armed militants shut in an estimated 370 000 bpd from the four key oil fields in the southwestern part of the country. It is estimated that 0.4 million bpd 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 US$90/bbl as of 19 January 2022, which was US$16/bbl more than the December average. This January daily high was the first time the Brent crude oil price had reached US$90/bbl since October 2014. Heightened political risk following the delay in Libya’s presidential and parliamentary elections (which were scheduled for 24 December 2021) continues to create uncertainty. In addition, ongoing maintenance on the country’s ageing infrastructure also continues to limit oil production.
As a result of this disruption in Libya, it is estimated that unplanned outages in OPEC countries increased to 2.2 million bpd in December 2021. This 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, it is estimated 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 bpd 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 bpd in December 2021. It is forecasted that OPEC crude oil production will increase by 2.5 million bpd to an average of 28.8 million bpd in 2022.
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