OPEC and its allies decided to increase oil production, albeit modestly
On Tuesday, OPEC and its allies decided to maintain a policy of modest increases in oil production next month as the rapidly spreading variant of Omicron has so far not affected demand much.
The OPEC+ group, which includes top producers Saudi Arabia and Russia, has resisted US pressure to open up more faucets in response to high energy prices driving inflation around the world.
The 13 members of the Organization of the Petroleum Exporting Countries (OPEC) and 10 of their allies have sharply cut output in 2020 as the pandemic hit demand.
Last year, they decided to gradually increase as the price recovers, while also reviewing the situation on a monthly basis.
After a brief videoconference on Tuesday, the group said it had agreed to increase production by 400,000 bpd in February, the same level as in previous months.
The club’s members approved the previous increase at their December meeting despite the arrival of Omicron, which sent prices down as the market wondered about its potential impact on the economy. global economy.
The decision in December won thanks to the White House over concerns about the effects of rising prices at US petrol stations, but it did not prevent crude prices from recovering significantly from their previous plunge.
The price of Brent, Europe’s benchmark oil contract, hit $79.76 at 13:25 GMT on Tuesday – 15% higher than before the group’s December 2 meeting.
OPEC analysts told the group on Monday that Omicron will have a moderate impact on demand and that the price increase is expected to continue into 2022.
While the new Covid variant is spreading like wildfire around the world, it appears to be much less severe than initially feared, stoking hopes that the pandemic can be tackled and life returned. a little more normal.
‘Feeling of stability’
In remarks on Monday, OPEC Secretary General Mohammed Barkindo emphasized the need to “always be agile and adaptive to the constantly changing situation”.
The team’s “flexible approach has helped provide an extra sense of stability, reassurance and continuity for the market and investors,” he said.
OPEC on Monday appointed Kuwaiti oil chief Haitham al-Ghais to succeed Barkindo on August 1.
Al-Ghais, who served as Governor of OPEC Kuwait from 2017 to June 2021, is the Deputy Managing Director of Kuwait Petroleum Corporation (KPC).
Iran exports
While OPEC+ countries have been slowly ramping up production again since last year, analysts note that some, such as Nigeria and Angola, have struggled to lift output.
“The important thing here is that Russia didn’t raise output in December, which could be a sign that they are getting closer to their capacity,” said Bjarne Schieldrop, principal commodities analyst at SEB. know.
Another heavyweight is Iran, whose exports have been restricted by US sanctions.
Negotiations to restore a deal, which would limit Iran’s nuclear activities in exchange for sanctions, are underway in Vienna.
They have dragged on since last year but negotiators are pushing to conclude negotiations to get the landmark 2015 deal back on track.
It fell into disarray in 2018 when the United States withdrew from the accord.
