Global oil production is set to outpace demand from December as the US and Opec+ countries increase supply, the International Energy Agency said on Tuesday.
"Much-needed relief for tight markets is on the way, with world oil supply set to overtake demand starting this month," the Paris-based agency said in its monthly report.
"The steady rise in supply, combined with easing demand, has considerably loosened our balances."
The Opec+ group, led by Saudi Arabia and Russia, has been gradually increasing supply by 400,000 barrels per day since August to meet rising demand as global economies reopen.
The US, Canada and Brazil are also set to pump at their highest annual levels, lifting overall non-Opec+ output by 1.8 million bpd in 2022, said the agency.
Global supply would soar to 6.4 million bpd next year, compared with a 1.5 million bpd rise in 2021, if Opec+ member countries fully unwind their remaining production cuts, it said.
In the near term, additional barrels could come from strategic petroleum reserves (SPRs) – an emergency stockpile kept by a country to preserve access to oil in case of natural disasters, national security issues and other events.
The US announced on November 23 that it would release up to 50 million barrels of oil from its SPR, with similar action taken by China, India, South Korea, Japan and the UK in an effort to ease energy prices.
Oil prices dropped sharply in November as the emergence of the Omicron coronavirus variant threatened a fledgling economic recovery. However, prices rose subsequently and remained steady as concerns about the new strain eased.
In the US, most cases of the Omicron variant, which was first detected in South Africa last month, have been mild, the US Centres for Disease Control said on Friday.
Booster shots are also effective against the new variant and could offer up to 75 per cent protection, according to another study by the UK Health Security Agency.
Brent, the international benchmark, was down 0.01 per cent at $74.38 a barrel at 3.21pm UAE time while West Texas Intermediate, the gauge that tracks US crude, was trading 0.03 per cent lower at $71.27 a barrel.
“The surge in new Covid-19 cases is expected to temporarily slow, but not upend, the recovery in oil demand that is under way,” it said.
New containment measures put in place to halt the spread of the virus are expected to have a more “muted impact on the economy” due to widespread vaccination campaigns, the agency said. Demand for road transport fuels and petrochemical feedstocks will continue to post healthy growth.
However, the agency has revised down its global oil demand forecast for 2021 and 2022 by 100,000 bpd on average, mainly due to reduced jet fuel use owing to renewed restrictions on international travel.
Total production of crude oil, natural gas liquids and refinery feedstocks in Organisation for Economic Co-operation and Development countries rose 4.6 per cent annually in September, the agency said in a separate report.
On Monday, Opec raised its global oil demand forecast for the first quarter of 2022 but left its full-year growth projection as it said the Omicron coronavirus variant would have a mild impact. The group of crude exporters kept the world oil demand growth unchanged at 4.2 million bpd for 2022.
However, it raised its global oil demand forecast for the first quarter of next year by 1.11 million bpd to 9.13 million bpd as global economies continue to recover from the pandemic.