(Bloomberg) — Oil swung between gains and losses ahead of an OPEC+ meeting on Tuesday to discuss production policy for February.
Futures in New York steadied around $75 a barrel after fluctuating earlier on Monday. The Organization of Petroleum Exporting Countries cut its estimate of the surplus in global oil markets this quarter, a day before the group and its allies consider another output boost. The findings may encourage the 23-nation coalition to proceed with the modest production increase that’s expected, according to a Bloomberg survey.
Libya’s crude output is expected to fall to the lowest in more than a year as workers try to fix a damaged pipeline. The outage comes less than two weeks after militia shuttered Sharara, the country’s biggest oil field.
With “demand remaining robust in the face of the omicron spread,” inventories below normal and supply disruptions in Libya, OPEC+ will probably stay the course and increase output by 400,000 barrels a day, said Rebecca Babin, senior energy trader at CIBC Private Wealth Management.
Libya expects its oil production to drop by another 200,000 barrels a day over the next week. Combined with supply lost from the shutdown of its Sharara field, that will trim the nation’s overall output to about 700,000 barrels a day.
“I think OPEC+’s decision is a foregone conclusion and omicron news and data will remain the major influence on oil sentiment,” said Vandana Hari, founder of consultant Vanda Insights in Singapore. “We’re likely seeing some bargain-hunting today after a rush to sell at the end of last week.”
See also: Key Oil Spread Signals Omicron Concerns Are Likely Easing: Chart
Last year, oil posted its biggest annual gain since 2009 as the rollout of Covid-19 vaccines helped economies reopen, boosting energy demand. While OPEC+ is poised to add another 400,000 barrels a day to global supply, there are still concerns about longer-term consumption as China tackles a virus flare-up and the omicron variant leads to flight cancellations worldwide.
“Speculators spent the last couple of months cutting bullish oil bets to the lowest in more than a year and some of these are now playing catchup with the market finding a firmer footing,” said Ole Sloth Hansen, head of commodities research at Saxo Bank A/S in Copenhagen. The market is being “driven by Libyan supply disruption, signs that Russia’s production growth is slowing and reduced worries about omicron’s impact on global mobility,” he said.
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