OPEC+ nations are unlikely to divert from their current script of increasing crude oil output by 400,000 barrels a day in the near future when members gather Tuesday for their monthly meeting in Vienna.
While analysts and traders keep a watchful eye for any pre-meeting signs from the cartel, Wall Street continued to have faith in the commodity as February deliveries of West Texas Intermediate went up 0.77% to $75.79 at 11:30 (UTC-5) on the New York Mercantile Exchange.
“I expect that OPEC+ will continue with their already agreed upon programme to restore another 400,000 barrels per day of production in February,” Andrew Lipow, president of Lipow Oil Associates, told Capital.com.
Reaction to possible actions by OPEC+ nations is rather muted and oil prices are rising after a big sell-off going into the New Year’s Day holiday where prices fell on very light volume.
“The market seems to be rising on a risk-on mode and on reports of threats to global supply,” Phil Flynn, senior analyst with Price Futures Group, told Capital.com.
US output the week ending 24 December 2021, was 15.7 million barrels daily, a drop of approximately 115,00 barrels per day than the week before, according to the EIA.
Refineries operated at nearly 90% capacity during the week, EIA data shows.
Overall production supplies over the last four weeks, averaged 21.4 million barrels daily, up more than 12% from the same period last year, according to the EIA.
Globally, Lipow said, inventories have dropped over the last several months with unexpected product outages in Latin America and Middle Eastern countries.
Additionally, continued worries about the Omicron variant on demand “makes the decision for OPEC+ pretty easy to stay the course,” Lipow explained.
There are reports from Libya of oil production falling by 200,000 barrels daily as crews work on a damaged pipeline. Two weeks ago, militias shut down the country’s largest field causing production to drop by 350,000 barrels a day.
“This becomes a bigger issue because OPEC is predicting the deficit in the next two quarters and this should be very supportive for prices especially if they can’t get this back online soon,” Flynn said.
Meanwhile, the Latin America country of Ecuador suffered a major disruption last week when a state-owned SOTE oil pipeline stopped pumping due to erosion in the country's Amazon region, the energy ministry said on Friday. Operations in oil fields are expected to resume in around 10 days.
Reportedly, the country’s output plummeted to 90,358 barrels on 29 December, down from 485,000 barrels per day before the crisis began forcing the government to declare force majeure.
Erosion, the county’s oil minister said, is naturally occurring along the Coca River, located in the eastern part of Ecuador.
Other oil prices continued to climb late Monday morning. Brent crude futures jumped 1.16% to $78.68 a barrel, while gasoline futures were at $2.35 a gallon, up 1.36%.
In a separate report, the EIA said energy prices rose more than other commodities in 2021, driven largely by increased demand from the initial phase of global economic recovery from the Covid-19 pandemic.
Energy prices in the S&P Goldman Sachs Commodity Index (GSCI) ended 2021 59% higher than the first trading day of the year. By comparison, most other commodity indexes included in the GSCI increased by about 20%.
Read more: Oil futures rise as Omicron worries ease
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