The Santos Ltd (ASX: STO) share price is rallying on Tuesday after Organisation of the Petroleum Exporting Countries (OPEC) said that oil demand will exceed pre-pandemic levels in 2022.
At the time of writing, the Santos share price is up 5.02% to a 1-month high of $6.48.
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Santos share price rallies on bullish oil forecast
In its monthly oil report, OPEC trimmed its oil demand for the last quarter of 2021 but sees demand exceeding pre-pandemic levels in 2022.
OPEC was bullish on the outlook for oil, forecasting:
In 2022, oil demand is expected to robustly grow by around 4.2 mb/d, some 0.9 mb/d higher compared to last month's assessment. Revisions were driven by both the OECD and non-OECD, as the recovery in various fuels is expected to be stronger than anticipated and further supported by a steady economic outlook in all regions. Oil demand in 2022 is now projected to reach 100.8 mb/d, exceeding prepandemic levels.
This positive commentary and forecast were underpinned by the Organisation's positive assessment of the global economy.
Although the global economy continues to be affected by developments related to COVID-19, 1H21 saw a healthy economic recovery. Following the strong quarterly economic growth in 3Q21, growth is forecast to slightly decelerate towards the end of the year. It should be noted that the recovery this year has been widely supported by unprecedented government-led stimulus, and global efforts done to contain COVID-19, particularly in Western economies and China.
However, OPEC put the brakes on near-term demand as a result of the Delta variant.
Oil demand in 3Q21 has proved to be resilient, supported by rising mobility and travelling activities, particularly in the OECD. At the same time, the increased risk of COVID-19 cases primarily fueled by the Delta variant is clouding oil demand prospects going into the final quarter of the year, resulting in downward adjustments to 4Q21 estimates.
As a result, crude oil prices rallied 2.63% higher overnight to ~US$70.35/barrel.
Santos share price snapshot
The Santos share price is up just 2% year-to-date despite oil prices rallying 45% in 2021.
