Mon. Jan 24th, 2022

Opec and its allies on Tuesday agreed to increase oil production for the seventh consecutive month in a sign that the cartel considers the spread of the Omicron coronavirus variant unlikely to significantly hurt demand.

The Opec + group, which has included Russia since 2016, said it would increase production by another 400,000 barrels a day in February, and continue with the monthly plan agreed in July to gradually reduce output at the start of the pandemic replace.

Major oil consumers including the US, India and Japan last year regularly called on Opec + to increase production at a faster pace, for fear that energy cost inflation could derail their economic recovery. But the cartel has consistently stuck to its plan of more gradual output increases.

“[Opec] have remained consistent with their policies despite all this uncertainty, ”said Helima Croft, Head of Global Commodity Strategy at RBC Capital Markets.

Croft added that, despite rising coronavirus infections worldwide, the spread of Omicron appears to have had less of an effect on oil consumption than feared. “Governments have shown that they are really reluctant to bring back deeply unpopular mobility restrictions, so the impact of demand is quite limited.”

Oil prices rose marginally on Tuesday as many traders returned to work after the holidays. Brent crude rose 0.6 percent to $ 79.47 a barrel while the U.S. benchmark West Texas Intermediate rose 0.5 percent to $ 76.44 a barrel.

Rupees recovered strongly in 2021 as the world economy recovered from the depths of constraints designed to control the pandemic, but fell back at the end of the year when the Omicron wave rose.

Christyan Malek at JPMorgan said that Opec and its allies are probably less concerned about Omicron than a month ago, but that the group may struggle to maintain the pace of production increases later this year, with some members finding it difficult to keep production promote.

“These Opul monthly increments will eventually naturalize into lower monthly increments as they cannot maintain the 400,000 indefinitely due to shrinking savings capacity,” Malek said.

“They are still very nervous about the need to encourage investment and it tends to be higher rather than lower prices.”

The meeting followed the appointment of Kuwait’s Haitham al-Ghais on Monday as Opec’s new secretary general, replacing Nigeria’s Mohammad Sanusi Barkindo after his second three – year term.

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