Oil prices sustain gain ahead of OPEC meeting

Oil prices rose on Tuesday as investors expected the Organisation of Petroleum Exporting Countries, OPEC+ producers meeting on output to stick with their planned increase for February based on indications Omicron would have only a mild impact on demand.

Brent crude was up 63 cents, or 0.8 per cent, at $79.61 a barrel while U.S. West Texas Intermediate (WTI) crude rose by 60 cents, or 0.8 per cent, to $76.68 a barrel.

OPEC+ has been increasing its output target by 400,000 barrels per day (bpd) since August and is expected to do so again for February.

“Number one driver (of global oil prices) at the moment is management of the supply side of the market by (producer alliance) OPEC+,” said Virendra Chauhan, analyst from Energy Aspects.

RBC Capital Markets analysts said OPEC+ was unlikely to change course given the current price outlook, pressure from the administration of U.S. President Joe Biden to boost supply and no major new COVID-19 mobility curbs.

“Though Omicron cases continue to climb in key geographies, the absence of widespread lockdown restrictions will likely keep near-term demand concerns in check,” RBC analysts said in a note.

However, analysts warned that OPEC+ may have to change tack if tension between the West and Russia over Ukraine flares up and hits fuel supplies, or Iran’s nuclear talks with major powers make progress, which would lead to an end to oil sanctions on Tehran.

“We think these two events represent major wildcards that could quickly alter the price trajectory and test OPEC’s rapid response mechanism,” RBC analysts said.