OPEC and allied oil-producing countries have decided to maintain the amount of oil they pump to the world even as the new omicron variant casts a spikey shadow of uncertainty over the global economic recovery from the coronavirus pandemic.
Officials from OPEC countries, led by Saudi Arabia, and their allies, led by Russia, voted Thursday to stick with a pre-omicron pattern of steady, modest monthly increases in oil releases — a pace that has frustrated the United States and other oil-consuming nations as gasoline prices rise. The OPEC+ alliance approved an increase in production of 400,000 barrels per day for the month of January at a meeting.
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The fast-mutating variant led countries to impose barriers to travel when it emerged late last week. Americans had been celebrating what seemed to be a nearly normal Thanksgiving after some pandemic restrictions eased.
The price of a barrel of U.S. benchmark crude fell with news of omicron. It was about $78 a barrel a week ago and was trading at about $64 a barrel Thursday following the OPEC+ decision. International benchmark Brent crude followed a similar path, falling from $79 a barrel a week ago to about $67 Thursday.
Saudi Energy Minister Abdulaziz bin Salman earlier this week played down any impact the little-understood variant would have on oil demand, telling the kingdom’s Asharq al-Awsat newspaper: “We are not worried."
But OPEC ministers briefly postponed one of their meetings this week, hoping for more insight into whether the variant is likely to push the world back toward pandemic lockdowns or leave markets relatively unscathed.
Some analysts predicted that the OPEC+ alliance — made up of OPEC members and allied non-members like Russia — would act cautiously Thursday, cutting the amounts of their planned releases only slightly, if at all, pending more clarity from medical experts on the new variant.
“OPEC+ is ready to wait for more data on the efficacy of current vaccines before making any significant changes to its output strategy,” said Louise Dickson, senior oil markets analyst for Rystad Energy.
Before omicron’s appearance, Thursday’s meeting had been shaping up as a potentially fraught moment in a growing dispute between oil-supplying nations and oil-consuming ones, as the global economy rebounds from the worst of the pandemic downturn and demand for oil surged.
Angering the U.S. and its allies, OPEC+ has stuck to a plan to open the petroleum taps bit by bit — even as oil prices surged to seven-year highs — until deep production cuts made during the depths of the pandemic are restored.
With rising gas prices putting him under political pressure at home, President Joe Biden last week responded to OPEC’s refusal to increase supplies more quickly by announcing the U.S. and other nations would release tens of millions of barrels of oil from their strategic reserves, boosting supplies and lowering prices.
Omicron’s emergence has unsettled those dynamics.
White House press secretary Jen Psaki told reporters Tuesday that she knew of no plans to slow releases from strategic reserves, despite the advent of the variant.
Biden sent senior energy adviser Amos Hochstein to the United Arab Emirates and Saudi Arabia this week to soothe relations, address energy prices and talk about working together in transitioning to cleaner energy. Hochstein met with the Saudi energy minister Tuesday.
“We continue to convey that we are hopeful they will release supply to meet the demand out there on the marketplace,” Psaki said.
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