The black liquid is bullish in the London session today, recouping the previous day’s losses, as investors focus their attention on the Organization of Petroleum Exporting Countries and its allies’ (OPEC+) decision over supply policy. However, investors are still cautious due to fears that the Omicron coronavirus variant will hurt fuel demand.
The global benchmark, the Brent crude futures is up 1.41%, currently trading $69.85 per barrel, having declined 0.5% in the previous session. The United States’ benchmark, the West Texas Intermediate (WTI) crude futures is also up 1.39%, currently trading $66.50 a barrel, after a 0.9% drop on Wednesday.
Both benchmarks in the last month, have fallen from the $80 trading range to levels not since August 2021.
What you should know
- Global oil prices have lost more than $10 a barrel since last Thursday, on the back of the news of Omicron new strain, which caused investors to panic sell.
- Since August, the group has been adding an additional 400,000 barrels per day (bpd) of output to global supply each month, as it gradually winds down record cuts agreed in 2020.
- The OPEC+ has a decision to make, as to whether or not release more oil into the market as previously planned or restrain supply.
- The new variant, coupled with some other factors which include the U.S coordinated attack on rising oil prices by releasing SPR, has complicated the decision-making process, with some observers speculating OPEC+ could pause those additions in January in an attempt to slow supply growth.
- Gains in oil markets are also held today as the U.S. weekly inventory data showed U.S. crude stocks fell less than expected last week, while gasoline and distillate inventories rose much more than expected as demand weakened. According to the Energy Information Administration (EIA), Crude inventories fell by 910,000 barrels in the week to Nov. 26, compared with analyst expectations in a Reuters poll for a drop of 1.2 million barrels.
What they are saying
Tsuyoshi Ueno, senior economist at NLI Research Institute stated, “Investors unwound their positions ahead of the OPEC+ decision as oil prices have declined so fast and so much over the past week. The market will be watching closely the producer group’s decision as well as comments from some of the key members after the meeting to suggest their future policy.”
Toshitaka Tazawa, an analyst at Fujitomi Securities Co Ltd stated, “Oil prices climbed as some investors anticipate that OPEC+ will decide to maintain the current supply levels in January to cushion any damage on demand from the Omicron spread.”
Fears over the impact of the Omicron variant of the coronavirus rose after the first case was reported in the United States, and Japan’s central bank has warned of economic pain as countries respond with tighter containment measures. U.S. Deputy Energy Secretary David Turk said President Joe Biden’s administration could adjust the timing of its planned release of strategic crude oil stockpiles if global energy prices drop substantially.
