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The oil markets have been more stable lately despite the Omicron scare, as investors shrugged off the impact of the strain on grounds that it is not as deadly as earlier strains.
Oil market decision-makers, the Organization of Petroleum Exporting Countries (OPEC), and its close allies, collectively known as OPEC+ have announced plans to increase daily oil output by 400,000 barrels per day beginning in February this year. As reported by CNBC, the move to maintain the plans which have been defined for a while became necessary as energy stakeholders weigh the potential impact of COVID-19’s new Omicron variant.
The energy industry was greatly impacted with the very first wave of the coronavirus pandemic, as governments around the world locked their economies to prevent spread in the first and second quarters of 2020. The resultant effect was a decreased demand for oil and a corresponding plunge in crude prices at that time. In order to protect oil producers and their members, OPEC+ unanimously slashed oil production by 10 million barrels per day, and the proposed hike comes as a definitive step toward restoring supply normalcy to the market.
On the back of the news, West Texas Intermediate (WTI) dropped 0.08% to $76.93 per barrel. Brent Crude was trading at $79.98 according to data from Oilprice.com.
“Oil prices are still hovering around $80 a barrel, that’s probably higher than what [US President] Joe Biden wants,” Herman Wang, managing editor of OPEC and Middle East news at S&P Global Platts, told CNBC’s “Street Signs Europe” on Tuesday.
Oil Market and Its Stability Factors
In reality, the oil markets have been more stable lately despite the Omicron scare, as investors shrugged off the impact of the strain on grounds that it is not as deadly as earlier strains.
“And then you look at the resilience of the market so far to the omicron variant, which OPEC, of course, has dismissed as mild and short-lived. So, there’s a lot of optimism around what demand is going to do even though there are these predictions of looming oversupply in the first quarter,” Wang said. “I think we are going to look for OPEC+ to continue with their 400,000 barrel per day increase at this meeting. What they are going to do at the February meeting and the March meeting, that is a problem for another time.”
A return to production boost comes off as a good growth factor for oil prices globally, as producers are optimistic their increased supply will meet with appropriate demand, as is being pushed for by the United States.
The regional energy crisis between Russia and Ukraine, as well as the nuclear negotiations with Iran, are also factors that can impact the prices of the global energy industry this year. For the former, the invasion of the Ukrainian borders by Russia can stir sanctions which in turn can move Russia to cut gas supply to Europe. Diplomatic relations are currently being employed to avert these regional tensions, to the benefit of all energy consumers around the world.