OPEC and its allies are discussing their next production policy in a two-day meeting starting Wednesday as oil prices slipped amid the release of US strategic petroleum reserves and concerns about the new coronavirus Omicron variant. Brent prices tumbled to near $70 per barrel on Tuesday from a three-year high of more than $86 in October, as the new virus strain sparked fears of a glut. While prices recouped some of the losses on Wednesday, there is still uncertainty stemming from the new virus variant.
The meeting on Wednesday resulted in no recommendation on output policy, Reuters reported, citing sources familiar with the talks. Previously, Russia and Saudi Arabia said there was no need for a hasty response to change OPEC+ policy. Meanwhile, Iraq said the alliance was expected to extend the current supply policy in the short term. The group has been gradually unwinding its record production cut starting in 2020. It has been raising output by 400,000 bpd every month since August.
Before the meeting, OPEC said Omicron mostly affected jet fuel demand, especially in Africa and Europe. Many countries have banned travellers from these regions and reimposed restrictions. The group also reported that the new variant could hurt transportation fuel demand within Europe. OPEC+ forecasts a 3 million bpd surplus in next year’s first quarter after the US SPR release, rising from 2.3 million bpd in its previous projection. However, analysts now estimated a 3 million bpd of global demand loss if the new virus strain prompted another wave of lockdowns.
