OPEC+ Alliance Hopes Oil Market Can Absorb Another Output Hike

In the month since OPEC and its allies last met and affirmed plans to keep hiking oil production in January, Dated Brent has risen almost 10%.
The resilient market, which appears to be shrugging off concerns over the Omicron variant, has delegates saying the OPEC+ alliance is likely to approve another 400,000-bpd increase in output quotas for February when ministers meet again on Jan. 4, S&P Global Platts reported.
But with many forecasters still warning of a looming oil glut, delegates say they will maintain a close watch on how market fundamentals shift over the coming weeks.
"We will remain very attentive to the evolution of the market," one said, asking not to be named to discuss private deliberations. "If necessary, we have also the option to meet before the February meeting to revise our decision."
Convening every month, OPEC, Russia and several other allies have been gradually rolling back the record production cuts they instated when the market crashed in spring 2020, and hopes to regain its pre-pandemic output levels by late 2022.
But a roaring comeback by the global economy throughout 2021 had demand outpacing supply for much of the second half of the year, drawing complaints from the US and other consuming nations grappling with soaring energy costs and heightened inflation.
Absent pressure from the White House, OPEC+ ministers might have very well paused their scheduled output increase for January to head off expected seasonal weakness in the first quarter.
After announcing that they would maintain the production hike, ministers took the unusual step of keeping their Dec. 2 meeting "in session", rather than adjourning, to maintain the option of convening at a moment's notice to respond to any deterioration in market conditions.
Crude and refined product prices have eased back from the multi-year highs reached in November, but their continued strength in the face of Omicron may keep the US calling for more relief. Recent disruptions to production in Libya and Nigeria have also bolstered prices.
S&P Global Platts assessed Dated Brent at $78.32/b on Dec. 30, up from $71.95/b at the start of the month.