OPEC and its allies will discuss their response to the Omicron coronavirus variant at their meeting this week, although their knowledge of the potential impact on oil markets remains limited.
The comments on Monday from Russia and Saudi Arabia, the leaders of OPEC+, are the latest sign the group may reconsider its planned January production increase, according to a report published by Rigzone. Oil futures have been volatile in recent days, as the price increase of September and October was nearly erased due to a sudden slump triggered by the emergence of the new Covid-19 variant.
A meeting of the OPEC+ Joint Ministerial Monitoring Committee this week has been postponed to gather more information about current events, including the new virus strain.
Crude futures sank more than 10% in both London and New York on Friday amid fears that Omicron, first identified in South Africa, could hit demand. Oil regained some of those losses on Monday, with benchmark Brent trading above $76 a barrel, as traders assessed the situation.
OPEC ministers and its partners are scheduled to meet on December 2 to set their oil production policy for January. While they agreed to boost output by 400,000 barrels a day in their last few meetings, some delegates say they may ditch the output increase in the short term. The market has been complicated by the virus and the release of emergency oil stockpiles by some key consumers, including the United States.
Morgan Stanley expects OPEC+ to pause its output increase next month, while JPMorgan Chase & Co. was predicting the hike would be suspended in the first quarter of 2022 even before the emergence of the Omicron variant.
When they meet, the OPEC+ alliance will talk about the need for measures to address the market situation.
It is unknown whether Russia would support any change in the group’s near-term production plans; however, the nation’s biggest producing companies are running out of spare capacity and the pace of Russian oil-output growth has slowed this month. This might give Russia a reason not to oppose a temporary halt in the OPEC+ ramp ups.
Russia’s President Vladimir Putin and his American counterpart, President Joe Biden, are unlikely to speak before the OPEC+ meeting but may do so before the end of the year. President Biden had previously urged key global oil producing countries to pump more and bring down global fuel prices, a call that the Saudis and Russians resisted.