What's going on?
OPEC+ are sticking together through slick and thin: a group of the world’s biggest oil-producing countries and their allies announced on Tuesday that they’ll up oil production next month.
What does this mean?
Demand for oil crept up in 2021 as the global economy got back to its feet, and OPEC+’s members have been boosting their output to meet that need. In fact, they’ve finally restarted about two-thirds of the production they halted when Covid first darkened their doorsteps.
Now, though, OPEC+ has announced it’ll be increasing production by 400,000 barrels a day next month. This, at a time when Omicron could knock economic recoveries – and, by extension, oil demand – off balance. As for why, OPEC+ is feeling cocksure: it says the world’s more able to deal with the pandemic these days, and that countries will still need to replenish their depleted stockpiles even if the new variant does get in the way.
Why should I care?
The bigger picture: Brits need a break.
More oil in the market should (all else equal) drive down the price of the slippery elixir and, by extension, the price of energy. And since energy costs bear a lot of the blame for high inflation, that might be no bad thing. The UK certainly wouldn’t mind: data out on Tuesday showed its manufacturers hiked prices at the fastest pace on record last month, which could force businesses to raise their prices and drive the country’s inflation rate even higher.
Zooming out: Airlines breathe a sigh of relief.
Airlines will like the sound of cheaper oil too, since it’ll bring their fuel bills down. And the good news has just kept coming for our airborne pals: the Omicron-plagued UK doesn’t look like it’ll impose stricter travel restrictions, and Germany’s relaxing its own rules. That could mean there’ll be less disruption than investors expected, which might be why British Airways-parent IAG and Lufthansa saw their stocks rise 12% and 5% respectively on Tuesday.