Even as oil prices bounced back on Monday (Nov 29); recovering some of the losses from last week, OPEC+ and its allies have postponed a technical meeting which was due to start today, to a later date. This is done to assess the impact of new Omicron coronavirus variant and the uncertainties surrounding it.
The move gives OPEC some time to assess the impact of recent events on oil demand and prices. Oil prices crashed together with other financial markets on Friday (Nov 26) by more than 10%, the largest one day drop since April 2020.
As the new variant was discovered, it spooked investors and added to concerns that a supply surplus could swell in the first quarter. Friday’s fall was worsened by low liquidity due to a public holiday in the United States.
OPEC had already predicted that surplus would grow steeply after the United States and other major consumers decided to release oil reserves to help cool down prices. OPEC+ has been releasing 400,000 barrels per day of oil per month while winding down its record cuts from last year when it cut production by as much as 10 million barrels per day to address lower demand caused by virus lockdowns.
All eyes will be on the meeting which is now expected to commence later this week. A very important point for discussion will be around the increasing worries on oil demand recovery, not just from the new variant, but also the downward revisions which experts are expecting to emerge from the renewed pressures of lockdowns in Europe. In addition, there is also pressure emerging from the global supply chain issues and rising inflation which could dampen the global economic growth.
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