OPEC+ is sticking with its plan to keep slowing raising oil output, despite the threat the new Omicron variant of the coronavirus could pose to global crude demand.
OPEC+ – a grouping of the Organization of the Petroleum Exporting Countries (OPEC), led by Saudi Arabia, and its allies led by Russia – made the decision at the conclusion of its meeting on Thursday to stick with its current plan to adjust crude output by an additional 400,000 barrels a day in January.
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The group has been incrementally opening its taps since August as it continues to unwind the deep production cuts it agreed to back in 2020, when oil prices crashed in the opening months of the pandemic.
Thursday’s decision to hold the line on its current output plan comes at a time of heightened concerns in global oil markets.
Benchmark oil prices have fallen more than $12 since the World Health Organization declared Omicron a “variant of concern” last week, triggering fresh travel restrictions – which could dent crude demand – as well as fuelling concerns over how effective current COVID-19 vaccines may be against the new strain.
Oil prices kept slipping following the news of Thursday’s OPEC+ decision. At 10:26am ET (15:26 GMT) in New York trading, global benchmark Brent crude was down 60 cents to $68.27 a barrel, while United States benchmark West Texas Intermediate (WTI) crude was down 66 cents at $64.91 cents a barrel, according to Bloomberg data.
Last Thursday, Brent crude was trading upward of $82 a barrel, while WTI was north of $77 a barrel.
Global oil markets have been whipsawed in recent weeks. An energy crunch that swept the globe in October saw prices rise sharply, prompting calls from US President Joe Biden for OPEC and its allies to boost output and help cool the market.
OPEC+ resisted those calls, leading the US and other nations to tap their strategic oil reserves to help alleviate global price pressures.
But the unpredictable path of the pandemic has flexed its muscle over global energy markets once again with the emergence of the Omicron variant.
“The Omicron variant has sobered up markets during the last few days, halting the oil demand recovery enthusiasm and sending traders scrambling to limit risk in their portfolios,” analysts at Rystad Energy wrote in a note to clients on Thursday.