London — Oil prices rose on Tuesday as investors expected Opec+ producers meeting on output to stick with their planned increase for February based on indications the Omicron variant of Covid-19 would have only a mild effect on demand.
Brent crude was up 63c, or 0.8%, at $79.61 a barrel at 11.08am GMT, while US West Texas Intermediate (WTI) crude rose 60c, or 0.8%, to $76.68 a barrel.
Opec+ has been increasing its output target by 400,000 barrels per day (bpd) since August and is expected to do so again for February.
“The number one driver [of global oil prices] at the moment is management of the supply side of the market by Opec+,” said Virendra Chauhan, an analyst from Energy Aspects.
RBC Capital Markets analysts said Opec+ was unlikely to change course given the current price outlook, pressure from the administration of US President Joe Biden to boost supply and no major new Covid-19 mobility curbs.
“Though Omicron cases continue to climb in key geographies, the absence of widespread lockdown restrictions will likely keep near-term demand concerns in check,” RBC analysts said in a note.
Britain’s vaccine minister said people being hospitalised with Covid-19 in the UK were generally showing less severe symptoms than before.
French finance minister Bruno Le Maire said although the surge of the fast-spreading Omicron variant was disrupting some sectors, there was no risk of it “paralysing” the economy, and stuck to a forecast of 4% growth for France’s GDP in 2022.
Factory activity also rose in Asia in December, suggesting the hit on output from the variant had been subdued.
However, analysts warned that Opec+ might have to change tack if tension between the West and Russia over Ukraine flared up and hit fuel supplies, or Iran’s nuclear talks with major powers made progress, which would lead to an end to oil sanctions on Tehran.
“We think these two events represent major wild cards that could quickly alter the price trajectory and test Opec’s rapid response mechanism,” RBC analysts said.