OPEC expected to maintain course to modestly open taps

Major oil-producing countries are expected to maintain on Tuesday their course of modestly boosting output as the rapidly spreading Omicron variant has so far not heavily hit demand. The so-called OPEC+ grouping, including top producers Saudi Arabia and Russia, has withstood pressure to more widely open the taps though high energy prices are fuelling a surge in inflation across the world.

The 13 members of the Organization of the Petroleum Exporting Countries (OPEC) and their 10 allies drastically slashed output in 2020 as the pandemic wreaked havoc with demand. Last year they decided to step it up again gradually as prices recovered, while reviewing the situation every month.

The Tuesday meeting between the 23 countries via video conference will start at 1300 GMT preceded by technical discussions between all of them, which are scheduled to begin an hour earlier. Analysts say they expect the group to step up production by 400,000 barrels per day in February, as they have done in past months.

"Since the last OPEC+ meeting (in early December), oil prices have recovered considerably, suggesting that also market participants seem to be less concerned about the Omicron variant weighing on oil demand," UBS energy strategist Giovanni Staunovo told AFP via email.

'Sense of stability'

In remarks on Monday, OPEC Secretary General Mohammed Barkindo emphasised the need to "remain highly nimble and adaptable to the constantly changing situation". He said the group's "flexible approach has helped provide an added sense of stability, reassurance and continuity to the market and investors". OPEC on Monday named Kuwaiti oil executive Haitham al-Ghais to follow Barkindo once his second term as secretary general expires in July. Al-Ghais, who was Kuwait's OPEC governor from 2017 to June 2021, will take up his three-year post on August 1. He currently serves as a deputy managing director of the Kuwait Petroleum Corporation (KPC) and has decades of experience in the industry.

While OPEC+ countries have been gradually increasing their output again since last year, analysts note some countries, such as Nigeria and Angola, have been struggling to lift production. "Important here is that Russia did not lift production in December which could be a sign that they are getting closer to their capacity," SEB chief commodities analyst Bjarne Schieldrop said.

Another heavyweight, Iran, has seen its exports limited by US sanctions. Talks to revive a deal, which curbed Iran's nuclear activities in exchange for sanctions relief, are underway in Vienna. They have dragged on since last year but negotiators are pushing to conclude the talks to get the 2015 landmark agreement back on track. It was thrown into disarray in 2018 when the US withdrew from it.