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LONDON, Dec. 9 (Reuters) – The bet taken by OPEC and its allies, under pressure from the biggest oil consumer, the United States, to increase oil production in January despite its own forecasts of oversupply, seems to be paying off with price stabilization.
Oil has stabilized at around $ 75 a barrel as market participants dismiss concerns of a glut, in part because they do not believe the Organization of the Petroleum Exporting Countries and its allies can reach their goal. new production target and that demand is expected to increase further.
Before its December 2 meeting, OPEC + had every reason to cut supply. A US-led release of oil from strategic stocks was expected to increase the surplus. Oil fell 10% on November 26 when reports of the new variant of the coronavirus emerged below $ 66 on the day of the meeting.
But OPEC + held firm and continued the nominal monthly increase of 400,000 barrels per day, believing that demand would not be hit hard. The rise in oil since has boosted OPEC’s confidence that there will be no major demand shock.
“The market made the decision well,” said an OPEC delegate. “The new variants created a short-lived negative sentiment, with no clear evidence.”
While a new round of movement restrictions resulting from the Omicron variant threatens to impact demand, there has been no return to the strict travel limits seen in previous waves of the pandemic.
At the same time, OPEC +, which unraveled last year’s record production restrictions with monthly increases, fell short of its promises due to a lack of capacity to pump more from some of the producers. of the alliance.
“Bottom line: all is well when Brent is listed at around $ 75,” a Russian source from OPEC + said.
Prices could rise further in 2022, according to Christyan Malek and other analysts at JP Morgan, who believe OPEC + will struggle to add 250,000 bpd per month and forecast $ 125 of oil next year in a November 29 note.
UNITED STATES WELCOMES DECISION
The decision to increase production was good for heavy oil consumers, who urged OPEC + to do more to lower prices. The White House, which has pushed for more oil, hailed OPEC + ‘s decision to increase production. Read more
In the days leading up to and following the December 2 meeting, OPEC had a number of meetings with representatives of consumer countries. A US delegation met with a number of officials from the United Arab Emirates and Saudi Arabia, as well as non-OPEC Qatar.
OPEC Secretary General Mohammad Barkindo and others held a December 3 meeting with Chinese officials, an OPEC source said, adding that it was a “positive” meeting and that ‘it took place a day after OPEC + decided to stick to the planned production increases.
OPEC officials deny that their decisions have anything to do with consumer pressure. A White House spokesman said: “The delegation’s meetings were unrelated to the OPEC + meetings and that was not the purpose of the trip,” which focused on a series of economic issues.
Neil Atkinson, a veteran oil analyst and former senior official with the International Energy Agency, said OPEC + ‘s move was good for producers and consumers.
He said the actual increase in OPEC + was likely to be less than 400,000 bpd, so it was unlikely to amplify the expected oil surplus in the first quarter, and it was difficult to see a return to the intensity of previous blockages.
“I doubt there is a major demand shock,” he said. “OPEC + has done the right thing. So far they have added barrels with caution as demand has picked up and prices have returned to levels that are a fair balance.”
Additional reporting by Olyesa Astakhova, Dmitry Zhdannikov and Timothy Gardner, editing by Elaine Hardcastle
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