Oil: OPEC and Russia decide to ignore the Omicron variant

Posted on Dec. 2021 at 16:21Updated Dec 2, 2019 2021 at 17:12

Once again, OPEC and Russia caught the markets off guard. The thirteen cartel countries and their ten Moscow-led allies decided on Thursday that they would continue to ramp up oil production, despite concerns sparked last week by the Omicron variant. The group’s production, which represents almost half of the world’s supply, will be well raised by 400,000 barrels per day next month.

It is a surprise and a good surprise for motorists who will see the price of fuel drop. Many experts expected a pause in the increase in production. The barrel of brent, which had given up nearly 15% in less than a week, recovered slightly Thursday afternoon, but remains around 70 dollars. The price of oil fell back to its August level, completely erasing the surge in early fall which had taken it above $ 85.

“Tiny” impact

OPEC and its allies will continue to “monitor the market closely” and do not rule out “making immediate adjustments if necessary”, specifies the press release released at the end of the meeting which was held by videoconference. Officially, the session started on Thursday even remains open, which means that a change of strategy can occur at any time with the convening of an emergency meeting. An unusual decision which shows how uncertain the market balances are with the resurgence of the health crisis.

For now, Omicron’s impact on oil consumption is admittedly “tiny”, Energy Aspects analysts remind us. The fall in prices in recent days is “exaggerated” according to them, unless it is proven that the vaccines are not effective against the variant. “But the general feeling will remain nervousness until we have more details,” they add, stressing that “governments have already quickly imposed restrictions on travel and border crossing.”

The variant’s rapid release could reduce oil demand by nearly 3 million barrels per day, Rystad Energy analysts warn, pushing it down to less than 96 million in the first quarter of 2022.

More information to follow …

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