Energy

Oil prices rise ahead of OPEC+ meeting

Key Points
  • Brent crude futures gained 43 cent to $79.41 a barrel at 0502 GMT.
  • U.S. West Texas Intermediate (WTI) crude recouped its earlier loses and rose 33 cents to $76.41 a barrel.
  • The benchmark contracts both climbed more than 1% on Monday.
An oil well pump jack operated by Chevron Corp. in San Ardo, California, U.S., on Tuesday, April 27, 2021.
David Paul Morris | Bloomberg | Getty Images

Oil prices rose on Tuesday as investors expected 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 48 cents, or 0.6%, at $79.46 a barrel at 1310 GMT, while U.S. West Texas Intermediate (WTI) crude rose by 42 cents, or 0.6%, to $76.50 a barrel.

"The oil market is bullish today as a result of optimism sourced from today's monthly OPEC+ meeting, which is helping oil prices trade higher," said Bjørnar Tonhaugen, Rystad Energy's head of oil markets.

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.

Britain's vaccine minister said people being hospitalised with COVID-19 in the United Kingdom were generally showing less severe symptoms than before.

French Finance Minister Bruno Le Maire said although the surge of the fast-spreading Omicron variant was disrupting some sectors, there was no risk of it "paralysing" the economy, and stuck to a forecast of 4% growth for France's GDP in 2022.

Global manufacturing activity remained strong in December, suggesting the hit on output from the variant had been subdued.

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.