Crude prices rise further following OPEC+ decision

SINGAPORE (ICIS)--Benchmark crude prices rose by more than $1/bbl on Friday following on from gains made in the previous session, OPEC and its allies (OPEC+) announced that they will maintain plans to raise production by 400,000 bbl/day in January 2022.

However, the producers’ group members, who met on 2 December, stated that they will continue to monitor the market and will adjust the plan if required.

Crude prices at 07.46 GMT

Concerns over the impact of the Omicron COVID-19 variant on demand heightened by the re-introduction of travel restrictions in some countries has led to a decline in crude prices since 26 November, when news of the spread of the variant in South Africa emerged.

Benchmark crude prices are presently down 18-20% from multi-year highs hit in October this year. Nevertheless, prices are still up by around 40% from levels at the start of the year.

With the agreement to raise output, the OPEC+ production target has been raised to 40.494m bbl/day for January 2022.

Since August 2021, OPEC+ has been unwinding the remainder of the production cut introduced last year following the 2020 collapse in oil prices with agreed 400,000 bbl/day monthly output increases.

However, OPEC+ members have had difficulty increasing production up to these target levels due to operational constraints.

In its most recent report, the International Energy Agency (IEA) estimated that OPEC+ production in September by members subject to the cuts totaled 37.98m bbl/day against a production target of 38.89m bbl/day. Indications are that in October, OPEC+ production continued to remain below target levels.

Prior to the OPEC+ decision there had been speculation that the group could pause its planned increases due to a combination of both Omicron demand issues and  the announcement earlier last week of the US-led plan by leading consumers to release crude from their strategic reserves.

US energy secretary David Turk said earlier in the week that the US could adjust the timing of the plan to release 50m barrels of crude from the US strategic reserves.

The oil market is no longer seen as tight as it was when the US first mulled a strategic reserve release to combat high prices and supply concerns at that time.

Meanwhile, nuclear talks being held in Vienna between Iran and leading world powers appear to have hit difficulties amid concerns over reports that Tehran plans to enrich uranium.

The aim of the talks is to revive the 2015 Joint Comprehensive Plan of Action (JCPA) nuclear deal.

An agreement could potentially help lift US sanctions imposed on Iran in 2018 and allow the return of Iranian crude supplies to the market.