Focus on oil production policy while Omicron shakes the markets

A picture of the OPEC logo prior to an informal meeting between members of the Organization of the Petroleum Exporting Countries (OPEC) in Algiers, Algeria.

Ramzi Boudina | Reuters

A group of the world’s most powerful oil producers meet on Wednesday to discuss the impact The new alternative to omicron Covid Likely to be on demand for energy.

The Organization of the Petroleum Exporting Countries (OPEC), led by the Kingdom of Saudi Arabia, is scheduled to meet via video conference from 1 pm London time. The 13-member group will be joined by non-OPEC countries such as Russia on Thursday.

There is little sign that the broader group, often referred to as OPEC+, intends to change course from the current production plan to a monthly increase of 400,000 barrels per day.

The OPEC ministers representing Saudi Arabia and Iraq indicated that the organization was likely to maintain this production policy, while Russia, the non-OPEC leader, said earlier this week that there would be no need to take urgent measures on the oil market.

Some analysts have questioned whether OPEC+ might be tempted to pause to assess the market, citing this. Increased price fluctuations And concerns that energy demand could be hurt by the omicron variable.

In fact, it is believed that some OPEC+ producers may struggle to meet their quota next month if the group goes ahead with increasing production.

Reuters survey published On Tuesday, OPEC found that OPEC pumped 27.74 million barrels per day in November, up 220,000 barrels from October, but that was less than the 254,000 increase allowed for OPEC members under the OPEC+ agreement.

international standard Brent Crude oil futures were trading at $72.62 on Wednesday afternoon in London, up more than 4.8% for the session, while West Texas Intermediate Futures were at $69.24, up nearly 4.6%.

Oil prices have fallen in recent days. Brent and West Texas Intermediate futures are on track to post their biggest monthly decline in percentage terms since March last year, Reuters reported, down 16% and 21%, respectively.

Russia and Saudi Arabia added, “So far [a] Brave face, Stephen Brennock, chief analyst at PVM Oil Associates in London, said in a research note.

Brennock said that OPEC has several issues to discuss this week, including the potential impact of the Omicron variable on future demand. The release of strategic reserves led by the United States of oil importing countries Iran’s possible return to the oil market.

“All things considered, there is a lot to suggest that OPEC+ will not initially increase its oil production in an effort to maintain current prices at around $70 a barrel,” Brinnock said.

“OPEC+ erred on the side of caution since it slowly started increasing supplies and its decision to suspend Planned increase in production in January and Keeping its stake steady is consistent with its cautious approach.”

Risks of falling oil prices

Amos Hochstein, the United States’ top energy diplomat, He told CNBC On Monday, the Biden administration would be willing to release more barrels of oil if the need arises again. Hochstein has held meetings with OPEC officials in recent days to try to improve US relations in the Middle East.

Unless OPEC+ announces new production guidance for the post-January months, the market could be overwhelmed by Thursday’s OPEC+ meeting, said Brad Waddington, economics and markets analyst at Longview Economics.

“Even if OPEC+ announces a long-term adjustment, downside risks for oil prices remain,” Waddington said, citing US-Iran nuclear negotiations and concern about Omicron.

“In short, it is likely that there will be an increased desire within OPEC+ to change their plans. Whether significant and convincing changes are announced this week, bears are watching closely and will be key to the direction of oil prices.”


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