Uche Cecil Izuora
The Organization of Petroleum Exporting Countries, OPEC and its allies will discuss their response to the Omicron variant of the coronavirus at their meeting this week, although their knowledge of the potential impact on oil markets remains limited.
The comments on Monday from Russia and Saudi Arabia, the leaders of OPEC+, are the latest sign the group may reconsider its planned January production increase.
Oil has been whipsawed in recent days, as the price increase of September and October was almost wiped out by a sudden slump triggered by the emergence of the new COVID-19 variant.
A meeting of the OPEC+ Joint Ministerial Monitoring Committee this week has been “postponed to get more information about the current events, including the new virus strain,” Russian Deputy Prime Minister Alexander Novak said in a statement.
The decision to delay the technical meetings “will enable us to at least win time, even if our knowledge is still limited” about the ramifications of Omicron for oil markets, Saudi Energy Minister Prince Abdulaziz bin Salman, told reporters in Dhahran.
Crude futures sank more than 10% in both London and New York on Friday amid fears that Omicron, first identified in South Africa, could hit demand. Oil regained some of those losses on Monday, with benchmark Brent trading above $76 a barrel, as traders assessed the situation.
Ministers from the OPEC and its partners are scheduled to meet on Dec. 2 to set their oil production policy for January. While they agreed to boost output by 400,000 barrels a day in their last few meetings, some delegates say they may ditch the output increase in the short term. The market has been complicated by the virus and the release of emergency oil stockpiles by some key consumers, like the U.S, last week.
Morgan Stanley expects OPEC+ to pause its output increase next month, while JPMorgan Chase & Co. was predicting the hike would be suspended in the first quarter of next year even before the emergence of the Omicron variant.
While Novak said earlier on Monday that there shouldn’t be any hasty decisions, according to the Tass news agency, and Prince Abdulaziz declined to comment on the OPEC+ meeting, it was clear that the group was poised for thorough discussions about its strategy.
The alliance will talk about “the need for measures” to address the situation in the market, Novak said.
He did not comment on whether Russia would support any change in the group’s near-term production plans. However, the nation’s biggest producing companies are running out of spare capacity and the pace of Russian oil-output growth has slowed this month. This might give Russia a reason not to oppose a temporary halt in the OPEC+ ramp ups.
Russia’s President Vladimir Putin and his U.S. counterpart Joe Biden are unlikely to speak before the OPEC+ meeting, but may do so before the end of the year, Kremlin spokesman Dmitry Peskov told reporters. Biden had earlier urged key global oil producing countries to pump more and bring down global fuel prices, a call that the Saudis and Russians have resisted.