Yesterday, OPEC and its allies began two days of meetings to decide whether to pump more oil into the market or curb supplies, amid a decline in oil prices and fears that the mutated “Omicron” strain of the Corona virus will weaken global energy demand.
Oil prices fell to nearly $70 a barrel yesterday, from a high of $86 in October, recording its largest monthly decline since the beginning of the pandemic, as the new variable raised fears of a supply glut.
In November, Brent fell 16.4 percent, while WTI fell 20.8 percent, the largest monthly decline since March 2020.
A document showed that “OPEC Plus” expects to increase the oil surplus to two million barrels per day in January, 3.4 million barrels per day in February, and 3.8 million barrels per day in March 202.
Extension of production policies
And the Iraqi News Agency quoted Oil Minister Ihsan Abdul-Jabbar as saying that it is likely that “OPEC” and its allies in the “OPEC Plus” alliance will decide to extend the current production policies for the next short period.
A number of OPEC Plus ministers, including Russia and Saudi Arabia, say that there is no need for the group to take an uncalculated reaction to adjust production policy.
Since August, the group has been adding 400,000 barrels per day to global supplies while gradually abandoning record cuts agreed in 2020, when demand waned due to the Corona virus. The official Algerian news agency reported that Algerian Energy Minister Mohamed Arkab said yesterday that “OPEC Plus” will provide the global market with enough oil, but he urged caution about the effect of the “Omicron” mutator.
“The threat to oil demand is real,” said Louise Dixon, senior oil market analyst at Rystad Energy. “Another wave of closures could cause up to three million barrels per day of oil demand loss during the first quarter of 2022.”
But Goldman Sachs said that the drop in oil prices in the past days was excessive, as the market takes into account in estimating prices the drop in demand by seven million barrels per day.
Adding to the pressure on prices, Federal Reserve Chairman Jerome Powell’s statement that the US central bank is likely to discuss accelerating the reduction of bond purchases amid strength in the economy and expectations that high inflation will continue. The Organization of the Petroleum Exporting Countries (OPEC) met yesterday at 13.00 GMT, followed by a meeting of OPEC Plus on Thursday. A delegate from the “OPEC Plus” alliance said that the “OPEC” meeting “should be clear.”
But some analysts indicated that “OPEC Plus” may suspend plans to add 400,000 barrels per day to supplies in January.
Even before Omicron’s emergence, the group was already studying the effects of the US and other countries’ announcement last week to use emergency crude reserves to cool energy prices.
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