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Tsvetana Paraskova

Tsvetana Paraskova

Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. 

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Oil Jumps As OPEC+ Leaves The Door Open To Revisiting Supply Increase

  • Brent rises back to $72, extending Thursday's rally
  • OPEC+ is leaving the door open to a flexible approach to production and the group could potentially plan a meeting before the next scheduled meeting on January 4

Oil prices rose by 3% early on Friday, extending gains from late Thursday, after the OPEC+ alliance said it could immediately revisit the planned 400,000 bpd increase for January if demand suffers in coming weeks.

As of 9:25 a.m. EST on Friday, WTI Crude was rallying 3.49% at $68.82 and Brent Crude was up 3.67% to $72.23.

OPEC+ decided on Thursday to stick to its initial plans to add 400,000 barrels per day to its collective oil production each month, to the surprise of some analysts who had expected a pause in the monthly supply additions in light of an expected oversupply early next year, a potential impact of the Omicron variant, and SPR releases from several nations led by the United States.

As early as the dust settled after the OPEC+ meeting, oil prices erased losses and bounced back on Thursday, after OPEC said that the group “agree that the meeting shall remain in session pending further developments of the pandemic and continue to monitor the market closely and make immediate adjustments if required.”

Analysts interpreted the wording as OPEC+ leaving the door open to a flexible approach to production and the group potentially meeting before the next scheduled meeting on January 4 if signs emerge of a serious impact of the new COVID variant on oil demand.

“The market appears to have taken comfort in the fact that OPEC+ is willing to reconvene and adjust production if necessary due to the Omicron variant,” ING strategists Warren Patterson and Wenyu Yao said on Friday.

“The decision by the group appears to be an attempt to buy themselves more time,” they added.

According to Saxo Bank, the market rallied after the meeting due to several reasons. These include the fact that traders have already priced in a significant and not yet realized drop in demand, the OPEC+ flexibility to make changes before January, the easing of the US-OPEC+ tensions, and the already months-long struggle of some OPEC+ members to pump to their quotas.

The next upside level to watch is the 200-day moving average at $72.85, Saxo Bank’s strategists said on Friday.

By Tsvetana Paraskova for Oilprice.com

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  • Mamdouh Salameh on December 03 2021 said:
    OPEC+’s decision yesterday to stick to its initial plans to add 400,000 barrels a day (b/d) monthly to its collective oil production was an inspired one which the global oil market liked by pushing oil prices up.

    It is a huge vote of confidence by OPEC+ in the robustness of the oil market and also a strong conviction based on recent reports that the Omicron variant is neither more transmissible nor more dangerous than the previous variants and therefore a global lockdown is highly unlikely with available vaccines capable of providing immunity against it. It also gives OPEC+ more time to assess the global oil market in the aftermath of the Omicron variant and the flexibility to revisit its planned monthly production increases if demand suffers in coming weeks.

    Dr Mamdouh G Salameh
    International Oil Economist
    Visiting Professor of Energy Economics at ESCP Europe Business School, London

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