Crude prices have climbed up by more than 4 per cent, still struggling to return to pre-Omicron levels, after falling by 16 per cent in November 2021, as OPEC’s meeting to assess the threat the new Omicron variant poses to oil demand.

Wednesday’s market session posted rise in prices on crude futures across board. Brent crude futures for February 2022 rose $3.56, or 5.1%, to $72.79 a barrel. US West Texas Intermediate (WTI) crude futures rose $3.25, or 4.9%, to $69.43 per barrel.

Both Brent and WTI front-month contracts in November 2021 posted their steepest monthly falls in percentage terms since March 2020, down 16 per cent and 21 per cent respectively.

The Organization of the Petroleum Exporting Countries (OPEC) are to meet on Wednesday, December 1, 2021, ahead of a meeting on Thursday, December 2, 2021 including OPEC and its allies.

Some analysts expect OPEC+ to pause plans to add 400,000 barrels per day of supply in January 2022 considering the potential hit to demand from travel bans to rein in the spread of the Omicron variant.

“The market continues to look for signs of any impact of Omicron on demand,” ANZ Research commodity analysts said in a note.

“There is much to suggest that OPEC+ will not initially step up its oil production any further in an effort to maintain current prices at around $70/bbl,” PVM analyst Stephen Brennock said.

Even if OPEC+ agrees to go ahead with its planned supply increase in January, producers may struggle to add that much.

“OPEC+ have erred on the side of caution since it began slowly boosting supplies and a decision to shelve a planned increase output in January 2022 and keep its quota flat comports with its cautious approach.”
Stephen Brennock , PVM analyst

Pressure Builds on OPEC due to Omicron Variant

A survey conducted by Reuters found that OPEC pumped 27.74 million bpd in November 2021, up 220,000 bpd from the previous month, but that was below the 254,000 bpd increase allowed for OPEC members under the OPEC+ agreement.

OPEC members that were able to meet their quotas for the November 2021 output schedule were Saudi Arabia and Iraq, which both boosted output largely as promised.

Output either declined or did not increase in Angola, Equatorial Guinea and Gabon, the survey found, due to lack of capacity to produce more.

Based on the survey, the biggest decline of 50,000 bpd was in Angola where exports hit a record low during the month according to tanker schedules with the second largest in Libya due to pipeline maintenance.

The tides are now building up towards OPEC+ as latest market developments raise major concerns of reconsideration of planned output.

Meanwhile, Russia and Saudi Arabia signaled earlier this week that there was no need for OPEC+ to race to adjust policy. The two major oil producers were of the view that the emergence of Omicron would not affect OPEC+ oil deals this week.

Ten analysts by Reuters were expecting crude stockpiles to fall by about 1.2 million barrels. However, gasoline inventories rose by 2.2 million barrels compared with analysts’ forecasts for no change, while distillate stocks rose by 789,000 barrels, which was larger than analysts had expected.