OPEC to hike oil supply in show of ’22 optimism

OPEC and its allies are expected to revive more oil supplies when they meet next week, underscoring the group’s optimism in the outlook for global demand.

The 23-nation alliance led by Saudi Arabia and Russia is likely to proceed with another modest monthly hike of 400,000 barrels a day as it restores production halted during the pandemic, according to a Bloomberg survey. Several national delegates also said they expect the boost — due to take effect in February — will go ahead.

The Organization of Petroleum Exporting Countries and its partners see global demand continuing to recover this year, taking only a “mild” hit from the omicron variant. Their confidence is being validated as busy traffic across key Asian consuming countries and dwindling crude inventories in the U.S. buoy international prices near $80 a barrel.

“The market can take the extra oil, as long as omicron or a macro downturn don’t crush demand again,” said Bob McNally, president of consultant Rapidan Energy Group and a former White House official.

Fifteen of 16 analysts and traders surveyed by Bloomberg predicted the output increase will be approved when the coalition gathers online Tuesday. Indicators on fuel consumption suggest the barrels can be absorbed, with all but one major Asian country registering a rise in mobility monthto-month, according to data.

Adding supplies would also show Saudi Arabia continues to be mindful of the inflationary risks a±icting their biggest customers, having acquiesced last month to President Joe Biden’s calls for extra production to cool runaway gasoline prices.

While that surprise move was initially read as bearish by traders, Saudi Energy Minister Prince Abdulaziz bin Salman helped to shore up market sentiment by resolving OPEC’s meeting would remain technically “in session” — allowing it to reverse the output increase at short notice if needed.

Proceeding with the next monthly increase isn’t without risks.

China, Asia’s biggest oil user, has shown signs of weakening fuel demand amid its relentless zero-COVID-19 approach and tough line on pollution, according to road-congestion data from local providers like Baidu Inc. In the U.S., airline cancellations are already piling up, with 1,125 flights scrubbed as rising coronavirus cases hobble staffing.

OPEC estimates the world oil market is returning to surplus, which will only widen in the coming months as supply jumps from the group’s rivals.