Oil on the rise ahead of OPEC meeting amid Omicron concerns

Major producers debated how to respond to the likelihood of a hit to fuel demand from the Omicron strain of the coronavirus. Hence, oil prices rebounded more than 3% on Wednesday, recouping a big amount of the previous session’s steep losses. Brent oil futures were up $2.46, or 3.6 percent, at $71.69 a barrel at 0742 GMT. Afterward, it reached a high of $71.95 earlier in the day. On Tuesday, the benchmark was down 3.9 percent.

After a 5.4 percent dip on Tuesday, U.S. West Texas Intermediate (WTI) crude futures gained $2.13, or 3.2 percent, to $68.31 a barrel. The Organization of Petroleum Exporting Countries (OPEC) will convene after 1300 GMT on Wednesday, ahead of an OPEC+ meeting on Thursday. The Thursday meeting will bring together OPEC and its allies, including Russia.

 “Considering the recent Omicron developments and the dismal price movement, OPEC+ may want to be more cautious on production increases,” said Leona Liu, an analyst at Singapore-based DailyFX. “For the time being, the market expects the cartel to abandon its projected output plan.”

OPEC supply level

According to some experts, OPEC+’s intentions to increase 400,000 barrels per day of supply in January would be on hold. The reason behind this is the probable impact on demand from travel restrictions imposed to combat the spread of the Omicron strain. “Since the United States and other nations committed to releasing emergency inventories to contain price rises… and since prices have already corrected from $85 a barrel to near to $70, OPEC+ may reconsider their policy,” Sunil Katke, head of commodities retail business at Kotak Securities, said.

However, some OPEC+ ministers have stated that there is no need to shift direction. Suppose OPEC+ decides to proceed with its planned supply increase in January. Producers might still find it difficult to meet that target. According to a Reuters poll, OPEC pumped 27.74 million BPD in November. The number went up by 220,000 BPD from the previous month. However, it is short of the 254,000-BPD increase authorized by the OPEC+ pact. find out more

According to market sources, data from the American Petroleum Institute industry organization indicated U.S. oil stockpiles declined by 747,000 barrels in the week ending Nov. 26. This was a slower decline than expected, indicating negative demand. According to Reuters, ten analysts estimate oil stockpiles to drop by approximately 1.2 million barrels.