02:40 PM EST, 12/14/2021 (MT Newswires) -- West Texas Intermediate crude oil settled lower on Tuesday after the International Energy Agency (IEA) said the market has returned to a surplus on rising production from the OPEC+ group and the United States while surging Covid-19 cases are cutting into demand.
WTI crude for January delivery closed down US$0.56 to US$70.73 per barrel, Marketwatch reported. February Brent crude, the global benchmark, was last seen down US$0.84 to US$73.55 while Western Canada Select was down US$0.88 to US$54.22 per barrel.
In its influential monthly Oil Market Report, the IEA said global oil production is exceeding demand as of December on higher production from OPEC+ and the United States. In 2022, rising output from the United States, Canada and Brazil will add an expected 1.8-million barrels per day of oil, while Saudi Arabia and Russia could also see record production if OPEC+ fully restores production cut early in the pandemic.
"In that case, global supply would soar by 6.4 mb/d (million barrels per day) next year compared with a 1.5 mb/d rise in 2021," the agency noted.
Even as it forecast swelling supply, the IEA cut its demand forecast for 2021 and 2022 by about 100,000 barrels per day on surging Covid-19 infections. It now sees 2021 demand increasing by 5.4-million bpd and rising by a further 3.3-million bpd in 2022 to pre-pandemic levels of 99.5-million bpd.
The agency's demand forecast is lower than expected by OPEC, which on Monday said it sees 2022 demand rising by 4.15-million bpd.
"OPEC believes that the impact of the Omicron variant on oil demand will be mild and short-lived. Because of the noticeable upward adjustment of the demand forecast, the call on OPEC is likewise set to be significantly higher in the first quarter of 2022," Commerzbank analyst Carsten Fritsch said in a note.