Opec+ sticks with planned 400,000 b/d hike for February

The Opec+ alliance has opted to press ahead with a 400,000 b/d increase in its February crude output quota, according to three delegates.

This is in line with a roadmap agreed in July last year to gradually unwind the huge production cut implemented in the early stages of the pandemic. The decision to stay the course with a 400,000 b/d monthly increment comes after the group's forecasters played down concerns over the impact on oil demand from the Omicron variant of Covid-19.

Today's meeting to decide February quotas was "smooth", according to two delegates. The previous gathering in December was more difficult, coming just days after the emergence of Omicron. Because of the uncertainty surrounding the new variant and its potential impact, Opec+ ministers formally kept the December meeting "in session" to monitor the market closely and make "immediate adjustments" if needed. Saudi energy minister Prince Abdulaziz bin Salman officially closed the December meeting today, delegates said, before declaring the new meeting open.

Yesterday the group's Joint Technical Committee (JTC) reviewed an Opec secretariat report which played down the disruption from Omicron. The report forecast that the effect of the variant would "be mild and short-lived, as the world becomes better equipped to manage Covid-19 and its related challenges".

As a result, the Opec secretariat kept its forecast for global oil demand growth in 2022 unchanged from its previous projection, at 4.2mn b/d. "Growth previously expected in the fourth quarter of 2021 now shifted to the first quarter of 2022," it said.

But the secretariat sees much tighter supply-demand balances for this year compared with its previous projections. In its base case scenario - one of three discussed in the report - the secretariat put the global surplus at 1.4mn b/d in the first quarter, down markedly from the 3.1mn b/d oversupply forecast last month. For the full year, the surplus is also forecast at 1.4mn b/d, down from Opec's previous projection of 1.7mn b/d.

The next Opec+ meeting will take place on 2 February, two delegates said.

By Adal Mirza, Ruxandra Iordache and Nader Itayim