OPEC+ has reason to pause oil production increase after COVID variant sparks crude plunge

A regular meeting scheduled for next week between members of the Organization of the Petroleum Exporting Countries and their allies – known collectively as OPEC+ – was in focus after the United States on Tuesday released release 50 million barrels of crude oil from their Strategic Petroleum Reserve in a coordinated move with five other countries: China, India, Japan, South Korea and the UK

The move comes after OPEC+ rejected calls by President Joe Biden and other world leaders to accelerate the pace of planned output increases, sticking to the timetable instead. aimed at increasing monthly production to 400,000 bpd. News report OPEC+ members said, in response to the coordination communiqué, were thinking about pausing those production increases, which helped explain the rise in oil after the release of reserves.

See: Why is oil price rising despite the US exploiting the Strategic Petroleum Reserve

However, analysts note that some OPEC+ members are likely to resist the shutdown due to concerns about feedback from the US and others. NS carnage on the crude oil market on Friday, with global benchmark Brent crude
BRN00,
+ 0.29%

down more than 11% and US benchmark West Texas Intermediate crude
CL00,
-13.04%

A drop of more than 13%, analysts say, could allay those concerns.

Read: World takes action as new coronavirus variant emerges in southern Africa

“While no one can predict the future, the timing of this week’s release is always questionable ahead of next week’s OPEC meeting. Looking at it now, it looks like more than that,” Michael Hewson, chief market analyst at CMC Markets, said in a note.

OPEC’s Economic Committee, which advises the cartel, on Thursday said the release of crude from strategic reserves would leave the market oversupplied by 1.1 million bpd early next year. , Reuters reported, citing an OPEC source.

That goes in the same direction as the US Energy Information Administration’s Short-Term Energy Outlook from November 9, forecasting that output growth by OPEC+, US shale producers and other countries other non-OPEC will make the market oversupplied by 500,000 barrels per year. on New Year’s Day, Marshall Gittler, head of investment research at BDSwiss Group, said in a note.

“The new COVID-19 variant and the risk of travel restrictions and lockdowns will only confirm OPEC doubts about the trajectory of oil prices,” he wrote.