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OPEC, allies set for another modest oil output hike

04 January 2022   |   12:42 pm
OPEC and its allies are expected on Tuesday to maintain their practice of modestly boosting oil output as the rapidly spreading Omicron variant has so far not heavily hit demand.

A 3D printed oil pump jack is seen in front of displayed stock graph and Opec logo in this illustration picture, April 14, 2020. REUTERS/Dado Ruvic/Illustration

OPEC and its allies are expected on Tuesday to maintain their practice of modestly boosting oil output as the rapidly spreading Omicron variant has so far not heavily hit demand.

The OPEC+ grouping, including top producers Saudi Arabia and Russia, has resisted pressure to more widely open the taps as high energy prices are fuelling a surge in inflation across the world.

The 13 members of the Organization of the Petroleum Exporting Countries (OPEC) and their 10 allies drastically slashed output in 2020 as the pandemic wreaked havoc with demand.

Last year they decided to step it up again gradually as prices recovered while reviewing the situation every month.

The video conference will start Tuesday following technical discussions.

Analysts expect the group to step up production by 400,000 barrels per day in February, as they have done in past months.

They approved another increase at their December meeting despite the emergence of Omicron, which had caused prices to fall as markets fretted over its potential impact on the global economy.

“Since the last OPEC+ meeting (in early December), oil prices have recovered considerably, suggesting that also market participants seem to be less concerned about the Omicron variant weighing on oil demand,” UBS energy strategist Giovanni Staunovo told AFP.

The price of Brent, Europe’s benchmark oil contract, hit $79.30 on Tuesday — 15 percent higher than before the group’s December 2 meeting.

OPEC analysts told the group on Monday that Omicron would have a moderate impact on demand.

While the new Covid variant is spreading like wildfire around the world, it appears to be far less severe than initially feared, raising hopes that the pandemic could be overcome and life return to a little more normality.

‘Sense of stability’
In remarks on Monday, OPEC Secretary General Mohammed Barkindo emphasised the need to “remain highly nimble and adaptable to the constantly changing situation”.

He said the group’s “flexible approach has helped provide an added sense of stability, reassurance and continuity to the market and investors”.

OPEC on Monday named Kuwaiti oil executive Haitham al-Ghais to succeed Barkindo once his second term as secretary general expires in July.

Al-Ghais, who was Kuwait’s OPEC governor from 2017 to June 2021, will take up his three-year post on August 1.

He currently serves as a deputy managing director of the Kuwait Petroleum Corporation (KPC) and has decades of experience in the industry.

Iran exports
While OPEC+ countries have been gradually increasing output again since last year, analysts note some countries, such as Nigeria and Angola, have been struggling to lift production.

“Important here is that Russia did not lift production in December which could be a sign that they are getting closer to their capacity,” SEB chief commodities analyst Bjarne Schieldrop said.

Another heavyweight, Iran, has seen its exports limited by US sanctions.

Talks to revive a deal, which curbed Iran’s nuclear activities in exchange for sanctions relief, are underway in Vienna.

They have dragged on since last year but negotiators are pushing to conclude the talks to get the 2015 landmark agreement back on track.

It was thrown into disarray in 2018 when the US withdrew from the accord.

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