Crude oil futures were higher in mid-morning trade in Asia Dec. 3, extending overnight gains, as investors turned bullish after OPEC+ chose to proceed on its monthly output hike, in a sign of the group's belief in firm market fundamentals.
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At 10:00 am Singapore time (0200 GMT), the ICE February Brent futures contract was up 54 cents/b (0.78%) from the previous close at $70.21/b, while the NYMEX January light sweet crude contract rose 59 cents/b (0.89%) at $67.09/b.
The OPEC+ producer group agreed Dec. 2 to raise quotas by 400,000 b/d as planned, shrugging off market jitters over the emergence of omicron and US-coordinated releases from strategic petroleum reserves.
However, it stood ready to reconvene "pending further developments of the pandemic, and [to] continue to monitor the market closely and make immediate adjustments if required," the group's communique stated.
"OPEC+ seems optimistic about how bad of a hit crude demand will take from omicron and that should be viewed as partially bullish. The bottom appears to be in place for crude prices and that should remain the case unless several US states go into lockdown mode," said OANDA senior market analyst Edward Moya Dec. 3.
Crude oil prices had initially dropped by more than $3/b after the decision Dec. 2, though they later turned north to settle higher on the day.
Emerging reports appeared to cement the view that the omicron variant, though more transmissible, will not be as deadly as earlier strains. Analysts noted that of the first two omicron cases in the US, one had mild symptoms while the other was already fully recovered.
"The US already has 70.4% of the population vaccinated and if omicron does not lead to more severe illness than delta, we could only be looking at a minimal impact to the short-term outlook," Moya said.
US investment bank Goldman Sachs earlier this week called the recent downward move in oil prices excessive, noting that investors had "far overshot" the potential impact of the omicron variant on global oil demand.
The bank remains bullish on crude oil and noted only a $5/b downside risk to its $85/b forecast for Brent crude in the coming months.