Saudi oil prices surged by more than $1 a barrel

Oil raised more than $1 a barrel on Monday as key exporter Saudi Arabia raised the price of crude it sells to Asia and the US and indirect talks to resume a nuclear deal with Iran appeared to have stalled. 4,444 February Brent futures were up $1.39 or 2% per barrel until 04:58 GMT, while West Texas Intermediate crude rose 67 in January and raised $1.40 or 2.1% to $66 a barrel.

On Sunday, Saudi Arabia raised its official selling price for all grades of crude sold to Asia and the US in January by 80 cents from the previous month. The price increase came despite  the Organization of  Petroleum Exporting Countries (OPEC) and its ally OPEC+, including Russia, last week, decided to continue increasing supply by 400,000 barrels per day in January.

Oil prices were also supported by lower growth prospects for Iran’s oil exports after the breakdown of indirect US-Iran talks last week on maintaining the 2015 nuclear deal with Iran. European officials on Friday expressed disappointment at the harsh demands of Iran’s new hard-line government. Talks are expected to resume in the middle of this week.

Consulting firm JBC said, “The (OPEC+) group insisted that the decision was entirely based on market fundamentals, but it is difficult to see a US hand in the game, especially considering the US delegation’s visit to Saudi Arabia this week.” Energy speaks in the notes. “The Iranian situation has almost certainly been discussed and Saudi Arabia’s approval to increase production suggests that a compromise has been reached and a better relationship with the Biden administration is not far off,” he said.

Russia’s total production did not increase despite the planned increase in production as it is expected to experience technical difficulties in increasing production according to the current agreement.  Both benchmarks recovered from a six-week decline from last week’s plunge for the first time since November 2018, raising concerns that a new strain of Omicron coronavirus could impact global economic growth and fuel demand. International Monetary Fund (IMF) governor said another sign of unrest from the ever-changing pandemic is that global lenders are likely to lower their estimates of global economic growth due to new variants.

Consulting firm JBC Energy lowered its baseline forecast for oil demand for December and January by about 300,000 barrels a day. He added that the revision eliminated a significant portion of the supply deficit the market had previously suffered. As of Sunday, Omicron had spread to about one-third of the state.