Opec and its allies will stay the course and bring 400,000 barrels per day of crude to the market in February despite demand concerns due to the increase in Omicron coronavirus infections worldwide.
The Opec+ group of oil producers, led by Saudi Arabia and Russia, agreed to increase production next month during an online meeting on Tuesday.
Brent, the global benchmark for two thirds of the world's oil, jumped 1.62 per cent to $80.26 a barrel after the announcement. West Texas Intermediate, the gauge which tracks US crude, rose 1.63 per cent to $77.32 a barrel at 7.25pm UAE time on Tuesday.
“Opec+ has grown confident that the market can take further increases in supply,” said Bjornar Tonhaugen, Rystad Energy’s head of oil markets.
“Brent prices have recovered close to $80 [a barrel] after dropping below $70 per barrel in early December and real-time transportation data globally suggests there has not been any significant impact on oil demand thus far from Omicron.”
Mr Tonhaugen expects oil markets to remain “somewhat tight for January and February and keep oil prices supported, especially with supply side concerns [due to production disruptions in Libya] and a disciplined Opec”.
Coronavirus infections have been rising worldwide in the past few weeks after the detection of the Omicron variant in South Africa in November.
The total Covid-19 cases worldwide currently stand at more than 290.6 million, with deaths exceeding 5.4 million, according to Worldometer, which tracks the pandemic. More than 255.4 million people have also recovered from the disease.
Demand for oil has continued to improve as Omicron has had only a mild impact. The new strain is affecting the upper respiratory tract, causing milder symptoms than previous versions of the virus, the World Health Organisation’s incident manager, Dr Abdi Mahamud, said.
Opec+ said it will meet again on February 2 to assess the market situation and decide its future production policy.
Last month, Opec raised its global oil demand forecast for the first quarter of 2022 but left its full-year growth projection unchanged as it expected the Omicron variant to have a mild impact on demand.
The oil exporter group expects oil demand to average 99.13m bpd in the first quarter of 2022, up 1.11 million bpd from its forecast in November. World oil demand growth was kept unchanged at 4.2 million bpd for the full year and total global consumption at 100.6 million bpd.