OPEC+ expected to stick with planned Feb output increase

OPEC+ is expected to stick to its plans to increase output in February when it meets on Tuesday, seeing a mild and short-lived impact on demand from the Omicron coronavirus variant, three sources from the oil producer group said.

OPEC+, a grouping of the Organization of the Petroleum Exporting Countries (OPEC) and allies led by Russia, has been gradually unwinding record oil production cuts of 10 million barrels per day (bpd), about 10% of global oil output, agreed in March 2020 to counter the hit to demand from the pandemic.

Current plans would see it raise its February production target by 400,000 bpd as it has done each month since August, when it began to unwind 5.8 million bpd of remaining cuts.

By the end of January, the group is left with about 3.4 million bpd of cuts to unwind by the end of September, as per its July 2021 agreement.

OPEC met on Monday and agreed to appoint Haitham al-Ghais, a former Kuwaiti governor to OPEC, as its new secretary general, to succeed Nigeria’s Mohammad Barkindo, according to an OPEC statement.

Al-Ghais will take over the role on Aug. 1.

“I would like to offer my cordial congratulations to HE Haitham Al Ghais on his appointment, by acclamation, as the next Secretary General of OPEC,” said Saudi Energy Minister Prince Abdulaziz bin Salman bin Abdulaziz.

The appointment by acclamation, a more informal process, was the idea of the Saudi energy minister, a source with knowledge of the matter said, and is a departure from a vote to find a consensus among all member states, which used to make electing secretary generals harder.

The appointment, early into a meeting lasting about an hour, contrasts with previous protracted elections when several countries sometimes nominated candidates.

OPEC+ played down the impact on the oil market from the Omicron variant.

“The impact … is expected to be mild and short-lived, as the world becomes better equipped to manage COVID-19 and its related challenges,” the Joint Technical Committee (JTC) report said.

“This is in addition to a steady economic outlook in both the advanced and emerging economies,” it added.

While the group has been raising its targets, its production increases have not kept pace as some members struggle with capacity constraints.

OPEC+ oil producers missed their production targets by 650,000 bpd in November and 730,000 bpd in October, the International Energy Agency (IEA) said last month.

In the JTC report’s base scenario, OECD commercial oil stocks in 2022 will remain below the 2015-2019 average in the first three quarters before rising above that average by 24 million barrels in the fourth quarter.

The data, however, shows the group is more bullish on the oil market outlook than its previous forecast in December.

It revised the 2021 deficit up by 300,000 bpd to 1.5 million bpd and it trimmed the 2022 surplus from 1.7 million bpd to 1.4 million bpd.