Friday, January 21

Oil advances as OPEC + sees a tighter market in the first quarter


Oil rose as global supplies are on track to be tighter than previously expected, and fears about an impact on global demand due to the omicron variance eased.

Futures in New York rose as much as 2.1% with Brent crude topping $ 80 a barrel, even as OPEC + stood firm on its plan to boost production.

With demand largely resisting the omicron variant, producer group OPEC + on Tuesday approved a 400,000 barrel-a-day increase in production scheduled for February, as expected. Its analysts cut first-quarter surplus estimates on Monday, predicting weaker supply growth from rivals.

“Yesterday’s OPEC + technical committee presentation of a less oversupplied outlook for the oil market in 2022 compared to its assessment last month appears to have pleased the bulls,” said Bjørnar Tonhaugen, director of oil markets at Rystad Energy. “We may see more action when we have more clarity on global production in the coming months.”


The overall supply and demand environment looks better for OPEC +. The group’s production increases are likely to be below agreed levels as some members struggle. Russia failed to increase production last month, while production in OPEC member Libya is expected to drop again this week. The market structure remains in a bullish retracement pattern, indicating continued supply tension.

“The biggest challenge is starting to really be implementing the theoretical increase in production as more and more producers start to struggle,” said Hans van Cleef, senior energy economist at ABN Amro.

Omicron’s spread is not reducing demand for oil, given the low level of hospitalizations, Russian Deputy Prime Minister Alexander Novak said in an interview with state-owned Rossiya 24 TV.

“We expect oil demand to recover to new all-time highs and for Brent to trade in the range of $ 80-90 / bbl this year,” said Giovanni Staunovo, commodities analyst at UBS Group AG.

Prices
  • West Texas Intermediate was up 1.4% at $ 77.13 a barrel as of 12:41 p.m. in New York.
  • Brent for March settlement gained 1.6% to $ 80.21

The OPEC + Joint Technical Committee, which analyzes the market on behalf of ministers, sees a surplus of 1.4 million barrels per day in the first three months of 2022, about 25% less than it estimated a month ago, according to a report seen by Bloomberg. .

Meanwhile, China could maintain border restrictions for the rest of this year as it prepares to host the Beijing Winter Olympics and a series of political events, according to Goldman Sachs Group Inc.The country is one of the few nations that still is compromised with a “Covid”. Zero focus ”, potentially hurting demand.

Other news from the oil market:
  • OPEC chose veteran Kuwaiti oil executive Haitham al-Ghais to become the organization’s top diplomat as the group and its allies navigate a delicate recovery from the pandemic.
  • Venezuela’s oil exports doubled in December from the previous year, and the country increased production of income-generating hydrocarbons in defiance of US sanctions.
  • Money managers last week pushed bullish bets on Brent by the most since July.

© 2022 Bloomberg LP


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