The Organisation of Petroleum Exporting Countries, OPEC and non OPEC allies collectively known as OPEC+ have raised its output target by 400,000 barrels a day from February.
The move had been broadly expected given U.S pressure to boost supply and no new major COVID-19 restrictions.
World oil markets are widely expected to remain prone to geopolitics in 2022 particularly over persistent Russia-ukraine standoff and ongoing Iranian nuclear negotiations likely to be closely monitored by OPEC+.
The body, particularly world’s largest oil producers, agreed on Tuesday to stick to its planned increase in oil production from February as energy investors weigh the potential impact of soaring omicron COVID-19 cases.
Led by OPEC kingpin Saudi Arabia and non-OPEC leader Russia, the energy alliance is in the process of unwinding record supply cuts of roughly 10 million barrels per day.
The historic production cut was put in place in April 2020 to help the energy market after the coronavirus pandemic cratered demand for crude.
“Oil prices are still hovering around $80 a barrel, that’s probably higher than what U.S. President Joe Biden wants,” Herman Wang, managing editor of OPEC and Middle East news at S&P Global Platts said on Tuesday.
“And then you look at the resilience of the market so far to the omicron variant, which OPEC, of course, has dismissed as mild and short-lived. So, there’s a lot of optimism around what demand is going to do even though there are these predictions of looming oversupply in the first quarter,” Wang said.
“I think we are going to look for OPEC+ to continue with their 400,000 barrel per day increase at this meeting. What they are going to do at the February meeting and the March meeting, that is a problem for another time.”
International benchmark Brent crude futures traded at $79.87 a barrel during deals in London, up around 1.1 per cent while U.S West Texas Intermediate crude futures stood at $76.89 a barrel, roughly 1 per cent higher.
Oil prices climbed more than 50 per cent last year, with energy investors optimistic that the highly infectious omicron variant may be less severe than feared. That’s despite COVID-19 infections reaching new record highs, with the U.S. reporting a globally daily record of over 1 million infections in just 24 hours.
“I do think it is these geopolitical wildcards that we have to pay very close attention to,” Helima Croft, head of global commodity strategy at RBC Capital Markets, said on Tuesday.
On Russia and Ukraine, Croft said: “I think that is a really incredible wildcard to watch because if you did have Russian troops cross the border into Ukraine you will get significant sanctions placed on Russia, which in turn could lead to a pretty serious energy crisis if Russia shut off gas into Europe.”
OPEC announced on Monday that it had decided to appoint Haitham Al-Ghais of Kuwait as secretary-general from August.
Al-Ghais, a technocrat who has worked in the oil industry for three decades, will replace Mohammad Sanusi Barkindo later this year to become the group’s top diplomat.