Despite the 20% plus slide in oil prices in the past three weeks the OPEC+ group decided to stay with its previously agreed upon plan of allowing a 400,000-barrels a day rise in the group’s production cap in January.
But the group left open the chances of the decision being changed by revealing in a statement that “the meeting remains in session,” meaning it can “make immediate adjustments” should the current market conditions shift (ie prices fall further under the influence of the new Covid Omicron variant).
The news however saw global prices perk up with US West Texas Intermediate (WTI) futures on Nymex in New York rising around 2% to just over $US67 a barrel.
That is a long way from the year plus high of $US85.41 a barrel on November 9. Brent crude futures were up nearly 2.5% at just over $US70 a barrel in early Asian dealings.
OPEC+ has an agreement in place to add 400,000 barrels a month to global supplies as it gradually reverses last year’s record supply cuts of roughly 10 million barrels a day.
The announcement will help steady prices but we won’t see a return to levels above $US80 any time soon – the fears being generated by the new Covid variant are just too raw and too scary for many traders given what the original Alpha variant did in the first half of 2020.
But the news will take pressure off the shares of local producers today. Woodside shares fell 1.8% on Thursday and Santos by nearly 1%.
It is now clear that Omicron was in various countries before it was official announced in late November. For that reason medical regulators are now watching for a spreading outbreak in Europe, the UK and the US (as well as Australia). Many of the small number of cases have been double vaccinated, which at this stage, seems to soften the symptoms.
Oil’s rise came as sharemarkets bounced after the falls the day before.
Gold prices fell more than 1.2% to around $US1,766 an ounce.
Iron ore prices though fell on Thursday by more than 2% to $US101.62 for 62% Fe fines delivered to northern China. That was after more reports of planned restrictions by Chinese authorities to control smog emissions.