You are here: Home » Markets » News
Business Standard

Oil rallies as Opec meets, but supply concern looms

Brent crude futures for February were up $2.08, or 3%, at $71.31 a barrel at 1445 GMT.

Oil Prices | OPEC | OIL supply

Reuters  |  LONDON 

Higher crude oil prices will also translate into higher input prices for consumer goods companies.
Representative image

rallied on Wednesday after recent sharp drops as major producers started to discuss future output against the backdrop of a new coronavirus variant triggering fresh travel restrictions that could dampen oil demand.

Equity markets, which often move in tandem with oil prices, also rebounded as investors bought the previous session's dip in the hope the Omicron variant would not derail an economic recovery.

Brent crude futures for February were up $2.08, or 3%, at $71.31 a barrel at 1445 GMT.

U.S. West Texas Intermediate (WTI) crude futures rose $2.06, or 3.1%, to $68.24 a barrel. Both contracts retraced some of their gains after an OPEC+ document showed the group forecasting a bigger oil surplus in the new year than previously thought.

Both Brent and WTI front-month contracts in November posted their steepest monthly falls in percentage terms since March 2020, down 16% and 21% respectively.

The Organization of the Petroleum Exporting Countries met on Wednesday ahead of a meeting on Thursday of OPEC+, which groups with allies including Russia.

OPEC+ sees the oil surplus worsening to 2 million barrels per day (bpd) in January, 3.4 million bpd in February and 3.8 million bpd in March next year, an internal report seen by Reuters showed.

Some analysts expect OPEC+ to pause plans to add 400,000 bpd of supply in January.

"There is much to suggest that OPEC+ will not initially step up its oil production any further in an effort to maintain current prices at around $70/bbl," PVM analyst Stephen Brennock said.

"OPEC+ have erred on the side of caution since it began slowly boosting supplies and a decision to shelve a planned increase output in January and keep its quota flat comports with its cautious approach."

Several OPEC+ ministers, though, have said there is no need to change course.

But even if OPEC+ agrees to go ahead with its planned supply increase in January, producers may struggle to add that much.

A Reuters survey found pumped 27.74 million bpd in November, up 220,000 bpd from the previous month, but that was below the 254,000 bpd increase allowed for members under the OPEC+ agreement.

In a bearish sign for demand, data from the American Petroleum Institute industry group showed U.S. crude stocks fell by 747,000 barrels in the week ended Nov. 26, according to market sources, a smaller decline than expected.

Government stockpile data is due at 1530 GMT. [EIA/S]

(Additional reporting by Sonali Paul in Melbourne and Koustav Samanta in SingaporeEditing by Louise Heavens and Mark Potter)

Dear Reader,

Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.
We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard.

Digital Editor

First Published: Thu, December 02 2021. 01:18 IST