Brent Oil Rises Even as OPEC+ Agrees to Boost Production

(Bloomberg) -- Oil ticked higher with global supplies in focus, even after OPEC+ agreed to revive more oil production. 

Futures in London rose 0.8% but were still beneath $80 a barrel. With demand largely withstanding the omicron variant, the producer group on Tuesday approved a 400,000 barrel-a-day increase in production scheduled for February, as expected. Its analysts on Monday cut estimates for a surplus in the first quarter, predicting weaker supply growth from rivals.

The overall supply-demand backdrop is looking better for OPEC+. The group’s production increases are likely to be less than the agreed levels as some members struggle. Russia failed to raise output last month while production in OPEC member Libya is expected to fall again this week. The market structure remains in a bullish backwardation pattern, which indicates continued supply tightness. 

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

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

Also see: U.S. Oil Market Braces for $4.6 Billion Wave of Selling

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 still committed to a “Covid Zero” approach, potentially hurting demand.

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