A worker in an oil field developed by Almetyevneft, an oil and gas production board (NGDU) of Tatneft.
Yegor Aleyev | TASS | Getty Images

An influential group of some of the world’s largest oil producers will meet on Tuesday to discuss the next phase of output policy as energy investors weigh the potential impact of soaring omicron Covid cases.

OPEC and its non-OPEC allies, known collectively as OPEC+, are scheduled to hold a videoconference from 1 p.m. London time.

OPEC+ has raised its output target each month since August by 400,00 barrels per day and energy analysts broadly expect the group to stick to this policy for February, citing U.S. pressure to boost supply and no major new Covid restrictions.

Led by OPEC kingpin Saudi Arabia and non-OPEC leader Russia, the energy alliance is in the process of unwinding record supply cuts of roughly 10 million barrels per day. The historic production cut was put in place in April 2020 to help the energy market after the coronavirus pandemic cratered demand for crude.

“Oil prices are still hovering around $80 a barrel, that’s probably higher than what [U.S. President] Joe Biden wants,” Herman Wang, managing editor of OPEC and Middle East news at S&P Global Platts, told CNBC’s “Street Signs Europe” on Tuesday.

“And then you look at the resilience of the market so far to the omicron variant, which OPEC, of course, has dismissed as mild and short-lived. So, there’s a lot of optimism around what demand is going to do even though there are these predictions of looming oversupply in the first quarter,” Wang said.

“I think we are going to look for OPEC+ to continue with their 400,000 barrel per day increase at this meeting. What they are going to do at the February meeting and the March meeting, that is a problem for another time.”

Geopolitical wildcards

International benchmark Brent crude futures traded at $79.63 a barrel during morning deals in London, up around 0.8%, while U.S. West Texas Intermediate futures stood at $76.65 a barrel, roughly 0.75% higher.

Oil prices climbed more than 50% last year, with energy investors optimistic that the highly infectious omicron variant may be less severe than feared. That’s despite Covid infections reaching new record highs, with the U.S. reporting a global daily record of over 1 million infections in just 24 hours.

World oil markets are widely expected to remain prone to geopolitics in 2022, with “saber-rattling” over the persistent Russia-Ukraine standoff and ongoing Iranian nuclear negotiations likely to be closely monitored by OPEC+.

“I do think it is these geopolitical wildcards that we have to pay very close attention to,” Helima Croft, head of global commodity strategy at RBC Capital Markets, told CNBC’s “Capital Connection” on Tuesday.

On Russia and Ukraine, Croft said: “I think that is a really incredible wildcard to watch because if you did have Russian troops cross the border into Ukraine you will get significant sanctions placed on Russia, which in turn could lead to a pretty serious energy crisis if Russia shut off gas into Europe.”

OPEC announced on Monday that it had decided to appoint Haitham Al-Ghais of Kuwait as secretary-general from August.

Al-Ghais, a technocrat who has worked in the oil industry for three decades, will replace Mohammad Sanusi Barkindo later this year to become the group’s top diplomat.