08:51 AM EST, 12/03/2021 (MT Newswires) -- Oil traded higher early on Friday, a day after OPEC+ agreed to stick to its policy of 0.4-million barrel per day monthly supply increases despite concerns inventories will climb because of weaker winter demand, as the group promised to revisit the decision should prices falter.
West Texas Intermediate crude oil for January delivery was last seen up US$1.87 to US$68.37 per barrel, while February Brent crude, the global benchmark, was up US$2.03 to US$71.70.
OPEC+ yielded to U.S. pressure to continue to add supply to keep oil and gasoline prices from spiraling higher, even as it fended off worries the additional barrels will swell inventories because of seasonally lower demand, new lockdown measures in Europe and the still uncertain impact of the Omicron variant by promising to revisit the decision if needed.
"Yesterday's OPEC+ meeting was short and sweet, but nonetheless as dramatic as any in recent memory as demand uncertainty had left the market looking for a potential pause in supply adds from the group - an expectation that ultimately went unmet as the group opted to continue with 400,000 bpd of supply adds for January, for now, as further data is assessed to potentially respond," Tudor, Pickering and Holt analyst Matt Murphy said in a note. "We'd been concerned coming into the meeting that what could be a positive signal for demand, OPEC+ opting to continue as planned with supply adds, would be taken negatively as crude prices faltered ~4% amidst the announcement, but, through a volatile session during which many a popcorn kernel was consumed, ultimately the market recovered."
Despite the additional supply, there were concerns that traders had oversold oil on Covid-19 worries and are now bidding up the commodity as Omicron fears ease somewhat.
"Updating our mapping of the recent $14/bbl post-SPR sell-off into fundamentals, we reiterate that the market has significantly overshot, pricing a net 7 mb/d hit to net demand over the next three months, well beyond the possible impact of the latest Covid variant which so far is mostly on jet demand which had only increased by 1 mb/d from last winter's pre-vaccination level," Goldman Sachs noted. " ... In the short term, information on the virulence of the latest variant will be required
for oil prices to start recovering. In the absence of investor appetite to add risk into year-end, it will then take evidence of a tight physical market to likely return above $80/bbl. This is still our base case expectation."