Oil prices rose after OPEC maintained its production policy. The current pressure is only temporary as it is caused by profit-taking.
World crude oil prices strengthened in connection with the outcome of the OPEC+ meeting which was in line with market expectations. However, at the time this news was written, investors' profit taking caused oil to correct from the previous day's gains. Brent was moving at around $79.82 per barrel while WTI (West Texas Intermediate) was trading at around $76.81 per barrel. Overall, oil prices are still solid in the area of 2-month highs.
In a meeting held on January 4, OPEC+ agreed to increase output by 400 thousand barrels per day (bpd) in February. This decision was welcomed positively by market participants because it reflected easing concerns about the potential for a large oil supply surplus in the first quarter of 2022. The White House also supported the results of the OPEC + meeting this time and commented that the organization had facilitated the global economic recovery.
"The oil market is back on a bullish path driven by optimism over the OPEC+ decision at Tuesday's meeting. This is helping oil prices move higher as market concerns ease over supply flooding the market," said Bjornar Tonhaugen, head of oil markets at Rystad Energy. .
Despite the positive outcome of yesterday's meeting, analysts warned that OPEC+ may need to change tactics if tensions escalate between the West and Russia over the issue in Ukraine. Moreover, the US-Iran nuclear talks leading to an end to oil sanctions could also be an important catalyst. "We think these two events represent major wildcards that could quickly change price trajectories and test OPEC's quick response mechanisms," RBC analysts said in a note.
Regarding the outlook for oil prices going forward, Capital Economics chief commodity economist, Caroline Bain, said that oil prices could potentially be depressed if OPEC+ continues to increase monthly production for the next few months while demand growth remains normal as it is now. He even estimates that the price of Brent oil is only $60 per barrel by the end of the year.
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