Ahead of today’s Organisation of Petroleum Exporting Countries (OPEC) meeting and after a slightly rising start to 2022, oil prices, yesterday, dropped slightly, erasing small gains recorded in the previous days in the year. At the start of trading for 2022, oil prices rose slightly in early trade but dropped in the later part of yesterday amid concerns about the impact of the soaring Omicron variant on fuel demand, especially jet fuel. WTI Crude was down 0.98 percent at $74.45, and Brent Crude traded down 0.71 percent to $77.20 a barrel. Nigeria’s 2022 budget is benchmarked at $62 per barrel.
Going into today’s meeting, the general market sentiment and expectations are that the OPEC+ alliance would likely proceed with its oil production policy of the past few months by deciding to add another 400,000 barrels per day to its collective output quota.
Although the body is expected to continue easing the collective production cuts by 400,000 bpd next month, early yesterday, oil prices made small gains amid signs of reduced supply from troubled OPEC member exempted from the cuts- Libya. Damage in an oil pipeline is expected to reduce Libyan oil production by another 200,000 bpd over the next week, on top of force majeure events and the shutdown of the biggest oilfield, Sharara. Libya will lose 200,000 bpd of its oil production for around a week after the National Oil Corporation (NOC) said that the main crude oil pumping line linking the Samah and Al Dhahra fields and the Es Sider port would undergo maintenance.
Another bullish factor for oil came from reports that the OPEC+ alliance expects the surplus on the oil market in the first quarter of 2022 at 1.4 million bpd, or some 25 percent lower than it forecast in early December. Expectations of strong demand this year have also resulted in the lowered surplus forecast for the full 2022, according to an internal document the Joint Technical Committee (JTC) is reviewed yesterday ahead of the OPEC+ ministerial meeting today.
The group continues to see the Omicron impact on demand as “mild and short-lived,” just as OPEC said in its Monthly Oil Market Report (MOMR) in mid-December.
