OPEC Opens the Door to Future Action, and Oil Prices Rise

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OPEC and its allies, including Russia, stuck to their earlier plans to increase production in January, but say they are ready to act quickly if they want to back the market. Oil prices, which had fallen before the announcement, rose slightly afterward, as investors are betting that OPEC will step in later if necessary.

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The cartel was not prompted to change its plans by the spread of the Omicron variant or the decision by the US and other countries to release oil from its strategic reserves to drive down prices. That said, OPEC said it plans to “continue to monitor the market closely and make immediate adjustments if necessary” and act between meetings rather than wait for next month’s meeting. .

International benchmark Brent crude rose 0.9% to $69.47 a barrel. West Texas Intermediate crude (WTI) rose 1.1% to $66.29. WTI is down 22% from its October 26 high of $84.65.

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OPEC will increase production by 400,000 barrels per day in January 2022, in line with its previous plans. The group is expected to fully restore production at the current time by September.

Analysts were mixed ahead of Thursday’s meeting, with some hoping OPEC would act now and others predicting it would stick to its plans. bill farren-price, director of intelligence at Envers Intelligence Research, wrote before the meeting that “we expect OPEC to cut production in the first half of 2022, as US supply increases and weak seasonal oil demand to keep prices supported.” OPEC will have to cut production due to above $65 a barrel.

A series of events over the past month came together to reverse the massive momentum that oil prices had built up over the years. Rising Covid cases have curbed demand in some parts of the world, and the actions of oil-consuming countries have made it clear that the political implications of $100 oil are likely to undercut that number.

President Joe Biden has already announced that the US will release crude from its strategic reserves to contain the rise in gasoline prices. Other countries such as China and Japan have also indicated that they will also issue crude. But the spread of the Omicron version, which has already resulted in countries blocking travel routes to try to slow transmission, has arguably had a bigger impact on prices. If a version is found to be more harmful or infectious than previous versions, further sanctions may follow.

Write to Avi Salzman at [email protected]

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