OPEC, the Organization of Petroleum Exporting Countries, announced this Thursday it would stick to its plan of raising output by 400,000 barrels in January. As a result, the US eased the pressure to release oil from the Strategic Petroleum Reserve.
Firstly, the US had been pressuring OPEC to increase output further to cool down oil and gasoline prices. After facing refusal from OPEC, the US warned it would release oil from the SPR.
However, after the news today, US Deputy Energy Secretary David Turk indicated there might be flexibility in the US release of reserves, telling Reuters on Wednesday that Biden’s administration could adjust the timing if oil prices dropped substantially.
On the other hand, upon the news, Brent crude fell more than $1. Currently, it is well below the record-high of $86 per barrel price from October. However, it is still more than 30% up compared to the beginning of 2021.
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OPEC could meet sooner than January
Furthermore, OPEC repeatedly said that the Covid-19 pandemic could slow down demand once again; especially after the out brake of the Omicron variant. Consequently, OPEC and allies known as OPEC+ considered a range of options in talks this Thursday. This included pausing their January hike of 400,000 barrels per day (bpd) or increasing output by less than the monthly plan.
Nevertheless, such a move would have caused a collision with Washington, a scenario neither Saudi Arabia and allies wanted. Instead, the group rolled over its existing deal to increase output in January by 400,000 bpd. veteran OPEC observer Gary Ross said about the matter. “Politics triumphs over economics. Consumer countries mounted enough pressure.”
However, “weaker prices now will only mean stronger later,” the observer said. On the other hand, OPEC expressed concerns over the Omicron variant, especially as infections keep surging in Europe. “We have to closely monitor the market to see the real effect of Omicron,” one OPEC+ delegate said after the talks.
Finally, OPEC and its allies will meet again on January 4; however, the group said it could meet sooner if the market situation demanded it. After today’s meeting, Russian Deputy Prime Minister Alexander Novak said the oil market was balanced, and global oil demand was slowly rising.
