Oil futures climb as OPEC+ agrees to rollover existing policy to boost output in January

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Crude oil futures traded higher on Thursday after a group of major oil producers decided to rollover their current production policy and boost production early next year, fueled by the emergence of the Omicron version of the coronavirus. Despite growing concerns over energy demand.

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On Thursday, the Organization of the Petroleum Exporting Countries and their allies, known as OPEC+, decided to rollover their current policy and increase monthly production to 400,000 barrels per day in January.

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Fawad Razakzada, Market Analyst, ThinkMarkets, said in a market update, “Demand concerns were already mounting and the last thing crude oil bulls were expecting to hear was another rollover of the current OPEC+ group policy. ” “Yet that’s exactly what happened, contrary to some expectations of only a modest hike or no increase for January.”

That’s why OPEC+ is “adding more oil to global supply and thus completely removing the risk of a supply shortage when demand is expected to fall,” Razakzada said.

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OPEC+ takes unusual step while maintaining current production policy and leaving its meeting ‘in session’

in your statementHowever, OPEC+ said its meeting remained in session to “continue to closely monitor the further development of the pandemic and the market and make immediate adjustments if necessary.”

“Oil prices have recovered from session lows as the market realizes this decision is actually quite smart,” Rebecca Babin, Senior Energy Trader at CIBC Private Wealth US, wrote in email commentary. That OPEC+ is not playing chess.”

“Going forward with an increase in output due to a 20% drop in prices, OPEC+ has essentially taken political pressure off the table from the US and other consuming countries,” she said.

“Second, OPEC+ has virtually no obligation to deliver these production increases,” Babin said. Over the past six months, “OPEC+ has yet to meet its target for any of its announced growth, leaving the market very tight.”

West Texas Intermediate Crude for January Delivery CLF22,

It rose $1.15, or 1.8%, to $66.72 a barrel on the New York Mercantile Exchange after trading as low as $62.43.

WTI, the US oil benchmark, was down more than 2% for the week as persistent concerns about crude and OPEC+’s near-term strategy eased prices. November recorded the biggest monthly drop for the first month WTI – down 21%.

Meanwhile, February Brent crude BRNG22,

The global benchmark, after falling 0.5% a day earlier and down 5.5% on Tuesday, was up 97 cents, or 1.4%, at $69.84 a barrel on ICE Futures Europe.

There are fears that the new restrictions imposed by countries to combat the new strain of coronavirus will hurt the appetite for energy products.

“The new Omicron version of COVID-19 may hit global oil market demand of 2.9 million barrels per day (bpd) in the first quarter of 2022, reducing overall expected demand from 98.6 million bpd to 95.7 million bpd . This triggers more lockdowns or restrictions,” according to estimates by Rystad Energy, released in a report on Thursday.

“If the variant spreads rapidly, leading to a rise in COVID cases and a resumption of lockdowns, Rystad Energy predicts oil demand to fall to 97.8 million bpd from the expected 99.1 million bpd in December 2021 alone could – a drop of 1.3 million bpd,” Rystad Projects.

Also Nymex Thursday, January Gasoline RBF22,
2.1% to $1.994 per gallon and January Heating Oil HOF22,
increased 2% to $2.119 per gallon.

Natural gas futures were trading lower, the Energy Information Administration said, as domestic supplies of natural gas fell by 59 billion cubic feet for the week ended November 26. This matches the average decline forecast by analysts, and compares to the five-year average decrease of 31 billion cubic feet for the period, according to S&P Global Platts.

Jan Natural Gas NGF22,
Falling 1.3% to $4.203 per million British thermal units.


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