Analysts and sources said that the decision of the “OPEC +” bloc this week to adhere to the planned increase in oil production for the month of February, reflects the easing of fears of the formation of a large surplus of oil in the first quarter, in addition to a desire for consistency in the guidance directed to the market.
The group of producing countries that includes the Organization of the Petroleum Exporting Countries (OPEC) and its allies, led by Russia, decided on Tuesday to increase production by 400,000 barrels per day in February.
The United States had urged the bloc to pump more crude oil to support the global economic recovery from the pandemic and calm prices, which reached about $80 a barrel. However, “OPEC +” said that the market does not need more oil.
During the talks, the ministers and officials studied the internal “OPEC +” data, which was seen by “Archyde.com” before Tuesday’s meeting, and it indicated an oversupply of 800,000 barrels per day in January, and 1.3 million barrels per day in February. .
Although this represents a surplus over demand, it is well below the initial estimates that raised concerns. In December, internal OPEC + figures estimated the surplus in January at two million barrels per day and increasing it to three million barrels per day in February.
“The picture has improved since the previous decision,” a delegate who participated in the “OPEC +” meeting said, referring to expectations for the first quarter of the year. He added, “Inventories are down.”
Other delegates said the adjustments were in part due to OPEC+’s assessment that Omicron would have a limited impact on demand, and that the inability of some producers to increase production due to factors limiting production capacity would keep the actual increase in supply low.
Investors seem to agree that the Omicron effect is minor. Oil prices rose to $80 a barrel, almost back to the level they were on November 26, when news broke about the emergence of the new mutant, which led to a drop in prices on the same day by more than 10%.
On Tuesday, Russian Deputy Prime Minister Alexander Novak spoke, after the OPEC + decision was issued, and said by phone to Rossiya 24 TV channel, that the bloc believes that there is uncertainty at the present time regarding the spread of Omicron.
He continued, “However, observations and analysis show that despite the high level of infection spread, hospital admission rates are low enough, and this does not have an impact on the decline in demand.”
Analyst Barbara Lambrecht at Commerzbank warned that sentiment could turn quickly, noting the possibility that Omicron could lead to tighter restrictions on movement, but added: “It seems that everything is going smoothly for OPEC + at the moment.”
OPEC+ sources said the bloc is also keen to adhere to its previous market guidance, a point that Novak, head of the Moscow delegation to the OPEC+ meeting, emphasized in December.
The meeting was relatively short by OPEC + standards. It took less than two hours, and delegates described it as easy and without problems.
An OPEC + source said: “We need stability. I am glad we got off to a smooth start to the year.” (Archyde.com)
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