IEA: Oil is back and 2022 could be volatile

The International Energy Agency's latest oil market analysis warns of a potentially bumpy ride ahead.

Why it matters: "If demand continues to grow strongly or supply disappoints, the low level of stocks and shrinking spare capacity mean that oil markets could be in for another volatile year in 2022," IEA said.

Driving the news: This morning's monthly report, which arrives as prices hit seven-year highs this week, boosts its global demand forecasts.

• IEA reaffirms that consumption is heading back to pre-pandemic levels despite recent infection records.

By the numbers: IEA has slightly revised estimates upward and now sees demand growing another 3.3 million barrels per day this year to again hit 99.7 mbd, the level before COVID throttled activity in 2020.

The big picture: The report sees major growth in supply and demand in 2022, a year beginning with a tight market as stockpiles are "well below" pre-pandemic amounts.

The intrigue: It also notes that the window onto how much oil is truly available is not perfect, which adds to the uncertainty.

• "A growing discrepancy between observed and calculated stock changes suggests demand could be higher or supply lower than reported or assumed."
• In addition, OPEC+ supply growth will lower the amount of spare production capacity.

• And there have been production interruptions or shortfalls from planned levels in some OPEC+ nations, including Libya and Nigeria.

Quick take: Remember those early COVID musings — never a majority view but definitely in the bloodstream — that oil demand might never bounce all the way back? It's slated to get there this year.

What we're watching: If prices keep rising or just remain high, the Biden administration faces more political headaches as the midterms draw closer.

• In May or June, $4-per-gallon gasoline in the U.S. is a possibility if oil reaches $100 per barrel, GasBuddy petroleum analyst Patrick De Haan told Axios' Nathan Bomey.