Oil Prices Plummet to Lowest Price in Four Years

As the outlook for crude oil in 2022 came into three-dimensional view this month, the market’s steadying mechanism managed to right itself again after another wobble. The Organization of the Petroleum Exporting Countries (OPEC) took its first formal look at next year in its July Monthly Oil Market Report (OMR), becoming the third of three widely watched prognosticators to do so. Among the other two, the International Energy Agency (IEA) began projecting 2022 oil-market data in its June Oil Market Report, and the intrepid U.S. Energy Information Administration (EIA) took its first analytical shot at next year way back in January in its Short Term Energy Outlook. The important third dimension that OPEC gave to the 2022 oil-market picture arrived on July 15 after two weeks of worry about whether production restraint by most of the group’s members and cooperating countries would survive. On July 18, though, the internal squabble driving that concern ended in a compromise that will result in production quota increases for several OPEC+ members. The 2022 projections by OPEC, IEA, and EIA, not to mention worry-driven elevation of crude oil prices prior to the compromise, make clear that the market needs OPEC+ to continue the orderly unwinding of its production cuts. In today’s blog, we compare the three forecasts and look at how the latest adjustment to OPEC+ supply management will affect the market.