By Adedapo Adesanya
Oil jumped more than one per cent on the first trading day of the new year ahead of the Organization of Petroleum Exporting Countries and allies (OPEC+) meeting to discuss production policy.
Brent crude gained $1.22 or 1.57 per cent to trade at $79.00 per barrel while the United States West Texas Intermediate (WTI) rose 88 cents or 1.17 per cent to settle at $76.09 per barrel.
The 23-nation alliance is on track to ratify another modest output revival of 400,000 barrels a day in February, delegates said.
The cartel cut its estimate of the surplus in global oil markets this quarter just as it expects the effect of the Omicron variant of the coronavirus on oil prices to be mild and temporary.
This is coming a day before the group and its allies consider another output boost.
Analysts note that the monthly meeting will be bullish than bearish since several of the OPEC members are having difficulty achieving assigned quotas.
At the same time, petroleum consumption is holding up well despite the spread of the omicron variant of COVID-19.
The global supply-demand balance is expected to remain tight given that there have been production issues recently especially in Nigeria, Ecuador, and Libya.
Nigeria was the only West African member of OPEC to increase production in November, but the increase fell short of its target.
Libya’s crude output is expected to fall to the lowest in more than a year as workers try to fix a damaged pipeline. The outage comes less than two weeks after militia shuttered Sharara, the country’s biggest oil field.
The North African producer expects its oil production to drop by another 200,000 barrels a day over the next week. Combined with supply lost from the shutdown of its Sharara field, that will trim the nation’s overall output to about 700,000 barrels a day.
Despite these bullish trends, there are still concerns about longer-term consumption as China tackles a virus flare-up just as the omicron variant is leading to flight cancellations worldwide.
Last year, Brent rose 50 per cent, spurred by the global recovery from the COVID-19 pandemic and OPEC+ supply cuts, even as infections reached record highs worldwide.
Although oil demand is expected to recover to pre-pandemic levels around mid-2022, steady OPEC+ supply increases, a recent uptick in US crude output and a weaker seasonal demand will lift global stockpiles.
