- WTI is trading modestly in the green on Tuesday in the $76.00 and is more composed after Monday’s choppiness.
- The main oil market driver on Tuesday will be the OPEC+ meeting, which starts at 1300GMT.
Whilst Monday’s session was choppy, perhaps exacerbated at the time by poor liquidity conditions with many Asia Pacific markets and London closed for holidays, oil markets appear to have gained composure on Tuesday. Omicron optimism-related risk-on vibes that have sent US yields soaring and pushed major US and European indices to record highs this week appear to be giving oil markets modest support on, with front-month WTI futures about 20 cents higher on the day and trading comfortable in the $76.00s, up from Monday’s lows in the $74.00s.
“The chief reason behind the return of investor confidence is Omicron,” said an analyst at Oanda. “Yes, the virus variant is much more contagious, but it is not leading to a proportionally larger number of hospital admissions… (so) it won’t stop the global economic recovery”. HSBC’s chief multi-asset strategist Max Kettner adds that “UK hospitalisations have increased in the past couple of days, but the link clearly appears to be weaker than during the previous winter wave… As such, the sensitivity of cases to hospitalisations has barely budged so far. If that trend was to continue, that’s good news”. The UK’s vaccine minister said on Monday that people currently being hospitalised with Covid-19 are broadly showing less severe symptoms than before. The French finance minister also expressed confidence on Tuesday that despite surging Omicron infections, the government’s 2022 economic outlook remains intact.
OPEC+ is the main oil market focus on Tuesday, with the cartel meeting to decide on future output policy. All indications from insider sources suggest the group will agree to continue with the 400K barrel per day output hikes into February. As to the expected timing, a meeting of OPEC+’s Joint Ministerial Monitoring Committee is currently underway and may culminate in a recommendation for OPEC+ policy. Markets will be more focused on the meeting of OPEC+ oil ministers which is slated to begin at 1300GMT and will actually result in a policy decision. Analysts at RBC Capital Markets said OPEC+ is unlikely to deviate from the current policy given the positive price outlook and pressure from the US to boost supply, as well as given the lack of major new Covid-19 curbs on travel in key markets. “Though Omicron cases continue to climb in key geographies, the absence of widespread lockdown restrictions will likely keep near-term demand concerns in check”.