In the Ministerial Meeting on Jan. 4, OPEC and its non-OPEC allies (OPEC+), reaffirmed the planned increase in oil output for February. According to the July 2021 agreement, the plan is for OPEC+ to raise the February target by 400,000 b/d.
The move has been expected by the market, given the pressure from the US to boost supply and the absence of new major COVID-19 restrictions.
According to a recent report from the Joint Technical Committee (JTC), OPEC+ expects the Omicron variant to have a "moderate and short-lived" impact on global energy demand and is optimistic about the economic outlook.
Brent prices have recovered close to $80/bbl after falling below $70/bbl in early December. Real-time transportation data globally suggests no significant impact on oil demand thus far from Omicron.
“What matters to the market and prices at the moment is the global picture, so we may see more action when we have more clarity over global production in the coming months. Ongoing outages in Libya, struggling production recovery in Nigeria, and reduced expectations for Russian production capacity add bullish weight to the scale from the supply side,” said Bjørnar Tonhaugen, Head of Oil Markets at Rystad Energy.
“All the while, for now the Omicron risk remains exactly that, a risk. Instead of an outright deeper lockdown impact, market balances will remain somewhat tight for January and February and keep oil prices supported, especially with supply side concerns and a disciplined OPEC+,” said Tonhaugen.
However, “it will be key for the month’s price volatility to watch whether OPEC+ ministers will opt to keep the meeting ‘in session’ and leave the door open to reconvene before the February meeting to revise the decision based on market conditions, mirroring the unorthodox but tactical move introduced at the previous get-together.”