Global oil producers plan to boost their output
Today, OPEC member countries and their allies agreed to raise oil production starting in February. The aim is to collectively increase production by a minimum of 400,000 barrels per day. This decision comes as a response to the reduced travel demand caused by the COVID-19 pandemic, leading to production cutbacks at the beginning of 2020.
Analysts suggest that apart from reversing their own production cuts, OPEC’s decision may also be influenced by the escalating gas prices in the United States. Herman Wang, managing editor of OPEC and Middle East news at S&P Global Platts, mentioned that oil prices are still high at around $80 a barrel, possibly exceeding the desired levels by U.S. President Joe Biden.
Wang further mentioned that the market has shown resilience to the Omicron variant, which OPEC perceives as temporary and mild. Despite looming concerns of oversupply in the first quarter, there is optimism regarding demand trends.
Global oil benchmark Brent pares gains after OPEC+ announced a 400,000 barrel per day production increase pic.twitter.com/67sWPjgRAz
— Bloomberg Markets (@markets) January 4, 2022
“I expect OPEC+ to continue with the 400,000 barrels per day increase at this meeting. What they decide for the upcoming meetings in February and March is a concern for later,” Wang stated. Despite a rise in COVID cases in the U.S., reports indicate that the Omicron variant is less severe than previous strains, fueling optimism among oil analysts for a return to normal travel patterns and a subsequent rise in oil demand, potentially lowering gas prices.
