Oil futures rose Tuesday, with the global benchmark Brent crude hitting its highest closing price in nearly six weeks at $ 80 a barrel.
Large oil producers, known as OPEC +, said they would stick to their plan to gradually increase production over the next month, despite the risks to oil demand associated with the spread of the Omicron variant of the coronavirus.
The consortium "is sticking to its original plan" and "is maintaining the linear growth path that it has stuck to for months," said Stewart Glickman, energy equity analyst at CFRA Research.
Following a videoconference meeting on Tuesday, OPEC and its allies, collectively known as OPEC +, announced that they would continue their agreement to increase monthly production by 400,000 barrels per day in February as expected.
"This seems to be a justification for not changing course despite the arrival of omicron," Glickman told MarketWatch. "When this variant first hit the market in late November, there were concerns that Omicron might have a significant impact on demand," and Brent prices fell about 10%, but Brent has since rebounded.
At the December meeting, the group had also extended incremental monthly production increases, but said it would leave that meeting "pending further development of the pandemic". Saudi Energy Minister Prince Abdulaziz bin Salman announced the close of this open session on Tuesday, according to a tweet from Amena Bakr, Deputy Bureau Chief and OPEC Chief Correspondent at Energy Intelligence.
The next meeting of the group is scheduled for February 2nd.
The additional offer from OPEC + is a signal that "there is sustained cohesion within the producer group, that oil demand will continue to rise despite the latest Omikron variant, which is causing some restrictions," said Peter McNally, Vice President and Global Lead for Industrials Materials and Energy at Third Bridge.
With this in mind, March Brent crude
rose $ 1.02, or 1.3%, to settle at $ 80 a barrel on ICE Futures Europe after hitting a high of $ 80.55. The settlement was the highest for a front month contract since November 25, according to Dow Jones Market Data.
West Texas Intermediate Crude for delivery in February
the US benchmark rose 91 cents, or 1.2%, to $ 76.99 a barrel on the New York Mercantile Exchange.
The demand outlook for oil "remains positive as the less lethal omicron variant has a modest impact on short-term demand and is likely to accelerate the rise in herd resistance to coronavirus," said Jay Hatfield, chief investment officer, Infrastructure Capital Management in New York, said MarketWatch.
Still, the biggest "wild cards" for oil are "supply-side," Glickman said.
"Geopolitical intrigues between Russia and Ukraine open up the possibility that Russia could – or at least threaten to reduce – natural gas and / or oil exports to Europe," he said.
Read: Tensions between Russia and Ukraine mean Europe's natural gas volatility is unlikely to subside
There is also the possibility that "Iran sanctions may be lifted, Iranian barrels put back on the market and oil prices may weigh on," he said. "We could see the Biden government paying attention to the latter, if for no other reason than relieving the high prices at the pump faster."
On Nymex Tuesday, February Gasoline Futures
increased 0.9% to $ 2.276 per gallon while heating fuel oil in February
Added 2.2% to $ 2.41 per gallon.
February natural gas
was at $ 3.717 per million British thermal units, down 2.6% after rising 2.3% on Monday.