Oil heads for biggest weekly gain in four months as OPEC + exit decision is warranted
LONDON: Oil prices rose on Friday and were heading for their strongest weekly advance since late August, as investors became less concerned about the potential effect of the omicron COVID-19 variant on economic growth and fuel demand.
Brent crude rose 1% to $ 75.16 a barrel around 3:15 p.m. Riyadh time, while WTI, the US benchmark, also gained 1%, to $ 71.68. Both scores are more than 7 percent higher this week, and their first weekly progression in seven weeks.
However, Brent has remained more than 7% lower since omicron was identified on November 23.
Prices have recovered since the Organization of the Petroleum Exporting Countries and its allies, known collectively as OPEC +, agreed on December 2 to move forward with a production increase scheduled for January.
OPEC + made the move under pressure from the world’s biggest crude consumer, the United States, which has pushed oil prices down, and amid concerns that the omicron variant could hurt demand, projections indicating an oversupply from January. A US-led release of oil from strategic stocks was expected to increase the surplus.
“The market made the decision well,” an OPEC delegate told Reuters. “The new variants created a short-lived negative sentiment, with no clear evidence.”
While a new round of movement restrictions due to the omicron variant threatens to impact demand, there has been no return to the strict travel limits seen in previous waves of the pandemic.
At the same time, OPEC +, which unraveled last year’s record production restrictions with monthly increases, fell short of its promises due to a lack of capacity to pump more from some of the producers. of the alliance.
Prices could rise further in 2022, according to Christyan Malek and other analysts at JP Morgan, who believe OPEC + will struggle to add 250,000 bpd per month and forecast $ 125 of oil next year in a November 29 note.
Neil Atkinson, a veteran oil analyst and former senior official with the International Energy Agency, said OPEC + ‘s move was good for producers and consumers.
He said the actual increase in OPEC + was likely to be less than 400,000 bpd, so it was unlikely to amplify the expected oil surplus in the first quarter, and it was difficult to see a return to the intensity of previous blockages.
âI doubt there is a major demand shock,â he said. âOPEC + did the right thing. So far, they have cautiously added barrels as demand has recovered and prices have recovered to levels that are a fair balance. “
December 10 marks the fifth anniversary of the formation of OPEC +, officially called the Declaration of Cooperation (DoC) between OPEC member countries and 10 non-OPEC oil producing countries.
On that day in 2016, OPEC member countries and Azerbaijan, Kingdom of Bahrain, Brunei Darussalam, Equatorial Guinea (which later joined OPEC), Kazakhstan, Malaysia, Mexico, the Sultanate of Oman, the Russian Federation, the Republic of the Sudan and the Republic of South Sudan met in Vienna, Austria, at OPEC headquarters following an agreement reached in September of the same year to reduce global supplies by one million barrels per day.
âLooking back to 2016, very few believed that collaborative efforts would grow and evolve into a major and robust cooperative force to help restore much needed stability in the global oil market,â the secretary said. OPEC General, HE Mohammad Sanusi Barkindo. “However, the 23 oil-producing countries continued to address the challenges they encountered, including putting in place effective and visionary policies to address the devastating impact of the COVID-19 pandemic.”
(Reuters contributed to this article.)