BAKU, Azerbaijan, Dec.3
By Leman Zeynalova – Trend:
OPEC+ decision to increase the production adds substantial downside risk to oil prices, Trend reports with reference to Capital Economics, UK-based research and consulting company.
OPEC+ decided to raise oil production by 0.4m bpd in January, sticking with their existing plan of unwinding productions cuts by September 2022.
‘The news adds to already strong downward pressure on oil prices, given that the emergence of the Omicron variant of COVID-19 has raised substantial uncertainty about oil demand. We suspect that the US-led co-ordinated release of oil reserves, announced last week but rumoured for weeks in advance, was one reason why OPEC+ decided to push ahead with their plan to raise oil output. The group might not want to provoke further action from the large oil consumers. We must admit, though, the decision by OPEC+ is somewhat surprising given the slump in prices since news broke of Omicron,” Capital Economics said in its latest report.
The company believes that it is possible OPEC+ needs more time to digest the news and reflect on the oil-market implications.
“Unusually, they have left today’s meeting “in session” which appears to be a way of leaving the door open for a change to output quotas before the next meeting in early January. Given that OPEC+ left supply unchanged, we are not planning any revision to our forecast that Brent crude will fall to $60 per barrel by end-2022. However, there is now substantial downside risk to this forecast given the possibility of an Omicron-related hit to demand,” the report reads.
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