Oil price predictions: crude oil price surges higher as OPEC+ sticks to output plan

US Energy Information Administration (EIA) predicts end of surging oil prices early next year as supply overtakes demand

Photo of oil rigs at sunset                                 
EIA forecasts decreasing oil prices for 2022 - Photo: Shutterstock


While the world shakes off the residual effects of the pandemic and global supply for oil continues to increase, the price of the commodity has surged.

With plans from the American White House that it will dip into reserves currently on hold, and the Organization of the Petroleum Countries (OPEC+) reluctant to dramatically increase supply in light of a possible return of the pandemic, the forecast for the commodity remains bullish, at least for the remainder of the year.

What does this mean for the crude oil forecast?

Let’s take a look at the EIA short-term energy outlook.

EIA short-term energy outlook

The EIA’s short-term energy outlook (STEO), released on 9 November 2021, predicts Brent spot prices to average $71.59 per barrel (p/b) this year, up from the previous October STEO which projected prices to average $71.38 for the year.

The November STEO sees Brent crude oil spot prices averaging $84/b in October an increase of $9/b compared to September, and an almost 50% increase from $43/b in October 2020.

The EIA oil forecast predicts prices to remain flat for the rest of 2021, averaging $82/b in the fourth quarter of 2021.

In response to rising prices, the EIA said: “Crude oil prices have risen over the past year as result of steady draws on global oil inventories, which averaged 1.9 million barrels per day (b/d) during the first three quarters of 2021.”

“In addition to sustained inventory draws, prices increased after OPEC+ announced in early October – and reaffirmed on November 4 – that the group would keep current production targets unchanged.”

The EIA predicted brent crude oil spot prices to decline next year to average prices of $72/b.

“In 2022, we expect that growth in production from OPEC+, US tight oil, and other non-OPEC countries will outpace slowing growth in global oil consumption,” the November STEO said.

According to data, crude oil supply in 2022 averaging at 101.42 million bpd will overtake global demand forecast to be around 100.88 million bpd.

For gasoline retail prices, which averaged $3.29 in October, the highest monthly average since September 2014, the EIA forecast gasoline prices would rise to average prices of $3.32/gal in November before decreasing to $3.19/gal in December.

OPEC+ sticks to existing pact

On Monday 1 November, despite pressure to increase supply from the US, OPEC+ doubled down on plans to stick to the deal agreed upon in July to add 400,000 barrels per day every month until April 2022 at the earliest. While this ramped up output will help to offset the production cuts put in place during the height of Covid-19, it remains much reduced compared to pre-pandemic output.

The OPEC+ group, which has included Russia since 2016, said in a statement it was sticking to its guns in order to “ensure a stable and a balanced oil market, the efficient and secure supply to consumers and to provide clarity to the market at times when other parts of the energy complex outside the boundaries of oil markets are experiencing extreme volatility and instability”.

After online ministerial talks, Russian Deputy Prime Minister Alexander Novak said: “We will be monitoring the situation, as we know, demand usually falls in the fourth quarter."

A source from OPEC+ told Reuters that part of the reason for holding off an increase of production was due to fear over another wave of the coronavirus. “No one wants to make any big moves,” the source said.

Consultancy firm Rystad Energy, in response to OPEC+ plans, wrote: “The outcome of the OPEC+ meeting was no surprise, but when prices are at above $80 per barrel Brent, this is a level that makes customers uncomfortable and producers happy but cautious”.

Biden plans to plunder reserves on hold

On 4 November, the White House made clear its opposition to OPEC+’s restrained increase in supply, with a source from President Biden’s National Security Council saying: “OPEC + seems unwilling to use the capacity and power it has now at this critical moment of global recovery for countries around the world,” adding that, “Our view is that the global recovery should not be imperilled by a mismatch between supply and demand.”

Intimating it would use “its full range of tools” to support the market, the possibility of dipping into the Strategic Petroleum Reserves – reserves which currently boast in excess of 600 million barrels of crude oil – is not out of all probability.

Bob McNally, head of Rapidan Energy Group, said: “Given the complete rebuff by OPEC+ and President Biden’s clear threats to respond, odds of a US, if not an International Energy Agency, strategic stock release are rising fast along with other retaliatory options.”

In the wake of the EIA forecast, a White House official stated that while it will continue to engage with OPEC+ in regard to increasing supply, but that as far as an SPR release is concerned, there are no new developments.

No doubt the EIA’s forecast that supply will overtake demand by early next year will work to mitigate fears around continued inflationary pressures.

In the wake of the EIA report, futures in New York closed 2.7% higher on Tuesday. In response to favourable market response Giovanni Staunovo, a commodities strategist at UBS Group AG, said: “The EIA report is dovish and therefore doesn’t support a US SPR release, and that, ironically, is driving prices higher.”

If the Biden Administration went ahead with plans to release oil from reserves this would dramatically influence impact oil price predictions as prices would go down.


Another major factor which could have an impact on crude oil predictions is whether a fourth wave of the pandemic is likely to occur.

In the Short-Term Energy Outlook, the EIA highlighted the fact that predictions made in relation to crude oil price predictions “remains subject to heightened levels of uncertainty related to the ongoing recovery from the Covid-19 pandemic”.

While it does appear life around the world is making a robust recovery, there are still many unknowns as to whether the virus will rear its head once again.

According to World Health Organisation (WHO), globally, as of 11 November 2021, there have been 251.27 million confirmed cases of the virus, including 5.07 million deaths.

As of 11 November 2021, a total of 7.16 billion vaccine doses have been administered.

One of these unknowns is how frequently individuals will have to get boosters and whether the vaccines are enough to keep the virus under control.

Oil price forecast 2021

There are several scenarios which would affect oil price predictions in different ways. If, for example, as appears to be the highest possibility at the given moment, the US lays off releasing reserve oil and the EIA predictions are largely accurate, oil prices will stay high before falling through December and into next year as supply overtakes demand.

If the US did decide to dip into reserves, this would create more liquidity thus creating a downward pressure on the price.

If the pandemic did rear its head once again, this could affect demand considerably, which in turn would affect an oil price forecast. In such a scenario, the price would fall once again.

It depends. Oil prices are already pretty high and while in the short-term demand is surpassing supply, this is, as forecast by the EIS, unlikely to remain the case going into 2022. 

With Covid-19 far from over, the possibility that a fourth wave could occur, thus affecting demand for oil, is not out of all likelihood.  

Oil is going up as demand is surpassing supply, in part due to the fact OPEC+ is sticking to its July 2021 plans to increase supply by only 400,000 barrels per day each month till April 2022 at the earliest. 

Depending on pandemic and other macroeconomic factors, the EIA predicted brent crude oil spot prices to decline next year to average prices of $72 per barrel as supply increases.

Further reading

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