Mike Muller, the head of Vitol Asia, said on Sunday that OPEC+ would adopt a cautious approach amid concerns about the new COVID-19 Omicron variant. The group has postponed its technical and ministerial meetings to give its committees more time to assess the potential impact of the new strain on the oil demand and supply balance. Muller said OPEC+ would unlikely make an immediate response as information about the Omicron variant had been “very preliminary.”
OPEC+ has been resisting calls to pump more oil faster as they were concerned about demand outlook, potential economic shocks, and uncertainty about economic growth in China and India. OPEC+ ministers will meet this week to discuss their future supply policy after prices nosedived more than 10% on Friday due to the new coronavirus strain. At the same time, coordinated release of strategic oil reserves by big oil-consuming countries also weighed on prices.
Muller added that the global oil market would continue tightening and need extra barrels if the new variant did not turn out to be hampering energy demand. He noted that global crude stocks remained below pre-pandemic levels, and the upstream sector had been lagging due to underinvestment. Meanwhile, a colder-than-expected winter and utilities’ switch from gas could boost crude demand.
