By Adedapo Adesanya
The Brent crude rose by 1.24 per cent or 98 cents on Tuesday to settle at $79.96 per barrel after the Organisation of the Petroleum Exporting Countries and allies (OPEC+) stuck to its planned increase in oil production in February as energy investors weigh the potential impact of soaring omicron cases.
This development also pushed the price of the United States West Texas Intermediate (WTI) higher yesterday by 1.17 per cent or 89 cents to $76.97 per barrel.
The group at its meeting on Tuesday agreed to raise its output target by 400,000 barrels per day from next month, a move that has been broadly expected, given US pressure to boost supply and no major new Covid restrictions.
Led by OPEC kingpin Saudi Arabia and non-OPEC leader Russia, the energy alliance is in the process of unwinding record supply cuts of roughly 10 million barrels per day. The historic production cut was put in place in April 2020 to help the energy market after the coronavirus pandemic cratered demand for crude.
The gains of yesterday occurred as OPEC+ played down the impact of the Omicron variant on oil demand, saying it would be “mild and short-lived” and was upbeat about economic prospects.
According to a report from the group’s Joint Technical Committee (JTC) report, oil is expected to perform better in 2022 due to a steady economic outlook in both the advanced and emerging economies.
Analysts also backed this with real-time transportation data globally, suggesting that Omicron has not yet had any significant impact on oil demand.
While OPEC+ has increased its output target each month, actual production has lagged as some members struggle with capacity constraints.
The alliance’s inability to deliver on its production targets, with some estimates putting the overall output at around 650,000 barrels per day to 730,000 barrels per day below the collective quota, is set to support oil prices next year, analysts say
Ongoing oil production outages in Libya, struggling production recovery in Nigeria, and reduced expectations for Russian production capacity also added support to the bullish trend.
In Libya, oil production has slumped to 780,000 barrels per day after maintenance work on a pipeline shut down 200,000 barrels per day output this week, adding to outages due to blockades at four oilfields since the end of December.
Libya currently pumps around 780,000 barrels per day even as the OPEC member exempted from the production cuts due to its volatile security situation produced 1.14 million barrels per day of crude oil in November 2021.
Meanwhile, OPEC+ will hold its next meeting on February 2.
Dipo Olowookere