Wed. Jan 26th, 2022

OPEC + agreed at the end of its meeting on Tuesday to comply with its previous decision to increase oil production by 400,000 barrels per day in February

OPEC + announced on Tuesday that it was sticking to its plan to gradually increase oil production next month, as the group removed concerns about Omicron’s impact on global crude oil demand.

The 23-member group, which includes Saudi Arabia-led OPEC and Russia’s cartel allies, agreed at the end of its meeting on Tuesday to abide by its previous decision to cut oil production by 400,000 barrels per day in February. to increase.

Last August, OPEC + started opening the taps incrementally every month to reverse serious production cuts imposed during the opening months of the pandemic when oil prices plummeted.

While economies rejected COVID restrictions last year, crude oil prices revived sharply, forcing US President Joe Biden to urge OPEC + to accelerate its production boost to cool rising energy prices.

But the cartel and its allies resisted Biden’s calls – which fueled a rally that raised the global benchmark Brent crude oil by about 50 percent last year and started on a strong note in 2022.

Brent is currently trading near $ 80 a barrel, while US benchmark West Texas Intermediate crude is trading near $ 77 a barrel.

If OPEC + stays on its current production path, its 2020 cuts should be wiped out by September.

While oil prices fell late last year when news of the Omicron variant flooded the world, OPEC + thinks its impact on crude demand will be “soft and short-lived”, Reuters news agency reported, citing a technical report he saw.

OPEC +’s decision to stick to its production plans was widely expected and there was little response in oil markets.

“For now, the new Omicron variant, although highly transferable, does not lead to the same rates of hospitalization and deaths associated with earlier variants,” Caroline Bain, chief economist at Capital Economics, told clients in a note on Tuesday. . “As a result, for the most part, governments have not introduced the widespread restrictions or travel restrictions that significantly hamper oil demand.”

Bain also noted that reduced oil output from Libya will provide extra cushioning for OPEC + as it stays the course with production increases.

“With Libyan output likely to be around 500-600 000 bpd lower in the coming weeks, it compensates more than the planned monthly increase in OPEC + production. “Indeed, if sustained, Libyan disruptions could even lead to calls for greater increases in OPEC + output,” she said.

OPEC + will hold its next meeting on 2 February.

Source link

By admin

Leave a Reply

Your email address will not be published.