- On Thursday, OPEC and its oil-producing allies agreed to increase output by 400,000 barrels per day in January.
- The OPEC+ conference was keenly watched, given the advent of the new omicron variety, which has the potential to reduce demand.
- OPEC+ said in a statement that if market conditions change, they will “make quick modifications” to production policy.
Sticking to the previously agreed plan
On Thursday, OPEC and non-OPEC oil producers, known as OPEC+, opted to stick to a previously agreed-upon plan to increase output by 400,000 barrels per day in January.
The alliance, however, stated in a statement that “the meeting is still in session,” implying that they can “make fast adjustments” if market conditions change.
During morning trade, oil prices fell, wiping away gains made earlier in the session.
Brent oil futures were trading at $68.01 a barrel, down 1.2 percent, while West Texas Intermediate futures were trading at $64.70 a barrel, down 1.3 percent.
OPEC+ had been widely expected to stick to its current strategy of increasing monthly output by 400,000 barrels per day. However, some questioned whether the company would be tempted to take a break after a period of high price volatility to review the market.
On Thursday, Alex Booth, head of research at Kpler, told reporters that they think OPEC+ are likely to retain that pace in releasing additional oil.”
“Don’t forget, we’re talking about more oil in January; the choice for December has already been taken.”
Since last Thursday, when the advent of the omicron COVID version became widely known, Brent crude futures have dropped more than $10. It will take weeks, according to the World Health Organization, to figure out how the mutation may influence diagnostics, medicines, and immunizations.
To progressively reverse last year’s record supply cuts of nearly 10 million barrels per day, OPEC+ has agreed to add 400,000 barrels per month to world supplies.
Saudi Arabia, OPEC’s de facto leader, has stated that the group’s output policy will likely be maintained. Non-OPEC leader Russia, on the other hand, stated earlier this week that no immediate action on the oil market was required.
Forced to increase supply
The OPEC+ summit comes after a period of increased friction between the US and its Gulf allies, most notably Saudi Arabia, over rising oil prices.
On Nov. 23, US President Joe Biden announced a coordinated oil release by the US, India, China, Japan, South Korea, and the United Kingdom to assist cool the market.
The US will release 50 million barrels from its Strategic Petroleum Reserve under the plan. Over the next few months, 32 million barrels will be transferred. In addition, the sale of 18 million barrels will be accelerated from a previously permitted sale.
The move was encouraged after OPEC+ constantly avoided the U.S. force to increase crude supply to prevent rising prices of fuel.