The world’s oil producers are raising their barrel output.
Earlier today, the countries that make up the intergovernmental body OPEC, alongside their allies, agreed to raise their oil production rates starting in February. Starting next month, OPEC is looking to collectively generate at least 400,000 barrels of oil per day. These increases are being made to ease the oil production cutbacks that went into effect near the beginning of 2020 due to the global reduction in travel caused by the COVID-19 pandemic.
In addition to undoing their own cutbacks, analysts suspect that OPEC is making this move in accordance with rising gas prices in the United States. “Oil prices are still hovering around $80 a barrel, that’s probably higher than what [U.S. President] Joe Biden wants,” Herman Wang, managing editor of OPEC and Middle East news at S&P Global Platts, told CNBC.
“And then you look at the resilience of the market so far to the omicron variant, which OPEC, of course, has dismissed as mild and short-lived. So, there’s a lot of optimism around what demand is going to do even though there are these predictions of looming oversupply in the first quarter,” Wang said.
Global oil benchmark Brent pares gains after OPEC+, as expected, announces a 400,000 barrel per day increase in production https://t.co/en1p38Eltx pic.twitter.com/67sWPjgRAz
— Bloomberg Markets (@markets) January 4, 2022
“I think we are going to look for OPEC+ to continue with their 400,000 barrel per day increase at this meeting. What they are going to do at the February meeting and the March meeting, that is a problem for another time.”
Despite the fact that COVID infections in the United States are still on the rise, reports that the now-dominant Omicron strain is less deadly than its predecessors has oil analysts optimistic that travel can begin returning to some semblance of normal soon, which in turn will increase the demand for oil and lower gas prices.