I can't emphasize how important this Friday's OPEC+ production decision will be for 2022. Thanks to Zzebraa's post containing an article from Energy Intelligence, we can see how OPEC+ views things - even prior to factoring in any impact from Omicron.
OPEC+ is forecasting a total 2021 OECD stock draw of 442 mmbbls. This year's draws have completely re-arranged the overall oil market and have brought OECD inventories back to normal. As a result, we are enjoying a normalization of prices and have brought a modicum of health back to the oil industry.
If OPEC+ maintains their present strategy of bringing 400 mbbls/d/mo back on line, and the 70 mmbbl SPR release occurs during first qtr of 2022, OECD stocks will grow next year by a whopping 639 mmbbls - completely reversing 2021 progress toward eliminating surplus inventories. In fact, we will be destined to close 2022 with WW stocks being higher than they were at the end of 2020!
After all this, OPEC+ needs to factor in any potential demand impact from Omicron. Hint - Omicron will not lead to higher demand. Further, the White House has floated a threat to OPEC that they will do another SPR release in February if OPEC dares deviate from their current plan.
I don't know what Friday's outcome will be. One thing I am fairly certain of however, is that OPEC won't continue their 400mbbl/day production increases. I am certain that OPEC will not just sit back and suddenly agree to relinquish control over the oil market - at the exact time their efforts over the past 18 months are beginning to pay off. The question is how they will react in order to minimize the political blowback a cessation of growth, or outright production cut, will create.
If they take action like I think they will and should, then its full steam ahead and you'll see a sizable snap back in the oil price (and energy stocks). If they punt with no changes, we may be in for a rough ride in 2022 and I will adjust my strategy accordingly.