The International Energy Agency said on Tuesday that the Omicron coronavirus variant will slow the recovery of global oil demand, but the market will be "more comfortable" in 2022.

The International Energy Agency wrote in its latest monthly report that the oil market "seems to be better than it has been on for some time."

It stated that the emergence of Omicron at the end of November “triggered a substantial oil sell-off, but the initial pessimism has now given way to a more cautious response”.

The IEA wrote: “The surge in new Covid-19 cases is expected to slow temporarily but will not overturn the recovery in oil demand.”

It said: "Compared with the previous Covid wave, the new containment measures taken to stop the spread of the virus may have a milder impact on the economy, especially because of the widespread vaccination campaign."

The International Energy Agency, which unites oil-consuming countries and advises the government on energy policies, said that due to new restrictions on international travel, it has lowered its global oil demand forecast for the next two years by an average of 100,000 barrels per day.

The agency said that it now expects global oil demand to increase by 5.4 million barrels per day in 2021 and 3.3 million barrels in 2022. By then, it will return to pre-pandemic levels, reaching 99.5 million barrels.

In terms of output, the International Energy Agency predicts that global oil production is expected to exceed demand starting in December, driven by increased production in the United States and the countries that make up the so-called OPEC+ group of oil producing countries.

Earlier this month, the Organization of the Petroleum Exporting Countries (OPEC) and its allies agreed to stick to the January production increase plan despite the economic uncertainty associated with Omicron.

"As the upward supply trend continues into 2022, the annual output of the United States, Canada and Brazil will reach the highest level ever," IEA said.

"If the remaining OPEC+ cuts are completely lifted, Saudi Arabia and Russia may also set records."

This may result in a daily oversupply of 1.7 million barrels and 2 million barrels in the first and second quarters of 2022.

The IEA stated: “If this happens, 2022 will indeed become more comfortable.”