Oil prices rise ahead of OPEC meeting

SARAJEVO, (Patria) - Oil prices rose on Tuesday on international markets above $79 as investors expect producers to confirm a planned modest increase in supply in February, given the assessment of a mild impact of Omicron on demand.

In the London market, the price of a barrel rose by 48 cents compared to the previous close, to $79.46. In the US market, a barrel was traded at a higher price of 42 cents, at $76.50.

The market is closely monitoring the meeting of the Organization of the Petroleum Exporting Countries (OPEC) and its allies on production policy today, SEEbiz.eu reports.

"The oil market is speculating today about rising prices on the wave of optimism spurred by today's monthly OPEC+ meeting, and that has helped prices rise," said Bjornar Tonhaugen of Rystad Energy.

The meeting began after noon, and sources recently said that producers decided to increase production by 400,000 barrels per day in February as well, as planned. The technical committee assessed that the new variant of the coronavirus should not significantly affect demand.

OPEC+ has been modestly increasing production since August last year. US President Joe Biden requested a significant increase in production last fall to curb fuel prices, but the cartel rejected his request.

Now, this request will likely solidify their decision to increase supply, especially given the relatively mild travel restrictions due to Omicron.

"Although Omicron cases continue to rise in key geographies, the absence of widespread lockdowns is likely to curb short-term demand concerns," RBC analysts noted in a note.

The British Health Secretary announced that patients hospitalized with COVID-19 in the United Kingdom generally show less severe symptoms than before.

French Finance Minister Bruno Le Maire, on the other hand, said that despite the rapidly spreading Omicron, which is disrupting some sectors, there is no danger of paralyzing the entire economy, confirming that he expects 4% GDP growth for France this year.

Factory activity across the globe also rose strongly in December, suggesting that Omicron will have only a mild impact on production.

However, some analysts warn that OPEC+ may have to change its policy if tensions between the West and Russia over Ukraine escalate and put pressure on fuel supply, or if successful negotiations on the Iranian nuclear program result in the lifting of sanctions on Tehran.

"We consider these two events to be major unknowns that could change the trajectory of prices in the short term and test OPEC's rapid response mechanism," said RBC analysts.

Separately, OPEC announced on its website that the price of a barrel of its member countries' reference oil basket was $78 on Monday, meaning its price did not change significantly compared to the previous trading day.