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Oil prices fell on Monday morning, erasing small gains from earlier in the day, as OPEC+ is largely expected to continue easing the collective production cuts by 400,000 bpd next month.

At the start of trading for 2022, oil prices rose slightly in early Asian trade but dropped in the early morning EST amid concerns about the impact of the soaring Omicron variant on fuel demand, especially jet fuel. 

As of 9:33 a.m. EST on Monday, WTI Crude was down 0.98% at $74.45, and Brent Crude traded down 0.71% to $77.20 a barrel.  

Earlier in the day, oil prices made small gains amid signs of reduced supply from troubled OPEC member exempted from the cuts, Libya. Damage in an oil pipeline is expected to reduce Libyan oil production by another 200,000 bpd over the next week, on top of force majeure events and the shutdown of the biggest oilfield, Sharara. Libya will lose 200,000 bpd of its oil production for around a week after the National Oil Corporation (NOC) said in the weekend that the main crude oil pumping line linking the Samah and Al Dhahra fields and the Es Sider port would undergo maintenance.

Another bullish factor for oil came from reports that the OPEC+ alliance expects the surplus on the oil market in the first quarter of 2022 at 1.4 million bpd, or some 25 percent lower than it forecast in early December. Expectations of strong demand this year have also resulted in the lowered surplus forecast for the full 2022, according to an internal document the Joint Technical Committee (JTC) is reviewing today, ahead of the OPEC+ ministerial meeting on January 4. 

The group continues to see the Omicron impact on demand as “mild and short-lived,” just as OPEC said in its Monthly Oil Market Report (MOMR) in mid-December.

Ahead of this month’s meeting on Tuesday, January 4, the general market sentiment and expectations are that the alliance would likely proceed with its oil production policy of the past few months by deciding to add another 400,000 barrels per day to its collective output quota.

By Tsvetana Paraskova for Oilprice.com

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Tsvetana Paraskova

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