LONDON MOSCOW: OPEC and its allies will decide on Thursday whether or not to release more oil into the market or restrain supply due to a gyration in crude prices, a US release from oil reserves and fears about the new Omicron coronaviruses variant.
Oil prices fell to around US $70 a barrel on Tuesday, down from three-year highs above $86 in October. The new variant raised fears of a glut and prices posted their biggest monthly decline in November since the start of the epidemic.
On Wednesday, the benchmark Brent was trading around US $72 at the end of the day.
The OPEC and its allies have been at odds with the United States, which has asked the group to raise output to help the global economy. Producers said they didn't want to hamper the recovery of the energy industry with a new glut.
In these uncertain times, it is imperative that we remain prudent with the non-OPEC countries in our approach and prepared to be proactive as market conditions warrant, said Diamantino Pedro Azevedo, Angola's energy minister and rotating OPEC president, in an opening address to OPEC.
Three OPEC sources said Wednesday's meeting of ministers from the Organization of the Petroleum Exporting Countries ended without a recommendation on output policy.
The OPEC alliance, which includes Russia and other producers, will likely make a decision on Thursday.
Russia and Saudi Arabia, the biggest OPEC producers, said there was no need for a knee-jerk reaction to amend policy ahead of this week's meetings. Iraq said that OPEC was expected to extend existing output policy in the short term.
Since August, the group has been adding more than 400,000 barrels per day of output to global supply as it gradually winds down record cuts in 2020 when demand cratered because of the Pandemic.
The impact of Omicron seems to be jet-fuel related for now, particularly in Africa and Europe, according to OPEC in a report before the meeting.
Many countries have banned travellers from southern Africa and some European states from being able to impose new coronaviruses restrictions.
More data on the severity of Omicron can be available in two weeks, and transportation fuel demand in Europe could be affected, according to the report.
Goldman Sachs said the oil price slide had been excessive, with the market now pricing in a seven million barrels per day hit to demand. In the first quarter, a three million barrels per day could be lost, according to Rystad Energy.
Even before concerns about Omicron emerged, OPEC had been weighing the effects of last week's announcement by the US and other major consumers to release emergency crude reserves to temper energy prices.
In the first quarter of 2022, OPEC forecast a three million barrels per day surplus, a rise from 2.3 million barrels per day previously, up from 2.3 million barrels per day.
The impact of the release would be muted as some countries made it voluntary and the duration was uncertain, according to the report.
If prices fall dramatically, the Biden administration could adjust the timing of the release, Deputy Energy Secretary David Turk told Reuters on Wednesday.
The record output cuts of 10 million barrels per day last year, equivalent to about 10 per cent of global supply, has been gradually scaling back last year's record output cuts of 10 million barrels per day. There are 3.8 million barrels per day of cuts still in place.
OPEC's November oil output has undershot the level it planned, as some OPEC producers have struggled to increase output.