(Bloomberg) — Oil rose before an OPEC+ meeting that’s expected to see the alliance agree to another output boost next month as it expects a tighter market.
Futures in London rose toward $80 a barrel after swinging between gains and losses. OPEC+ is set to ratify a 400,000-barrel-a-day increase for February when it gathers on Tuesday, delegates said. Its analysts on Monday cut estimates for a surplus in the first quarter, predicting weaker supply growth from rivals. While concerns remain about Covid-19 flare-ups weakening demand, they are easing with the latest variant potentially milder than previous strains.
The overall supply-demand backdrop is looking better for OPEC+. The group’s production increases are likely to be less than the agreed levels as some members struggle. Russia failed to raise output last month while production in OPEC member Libya is expected to fall again this week. The market structure remains in a bullish backwardation pattern, which indicates continued supply tightness.
“I don’t expect much surprise” from OPEC+, said Hans van Cleef, senior energy economist at ABN Amro. “The biggest challenge is starting to be to actually implement the theoretical rise in production as more and more producers start to struggle.”
The OPEC+ Joint Technical Committee, which analyzes the market on behalf of ministers, sees a surplus of 1.4 million barrels a day in the first three months of 2022, about 25% less than it estimated a month ago, according to a report seen by Bloomberg.
Meanwhile, China could maintain border restrictions for the rest of this year as it prepares to host the Beijing Winter Olympics and a series of political events, according to Goldman Sachs Group Inc. The country is one of the few nations still committed to a “Covid Zero” approach, potentially hurting demand.
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