OPEC + agrees to move forward with an increase in oil production as US pressure trumps virus fear

The logo of the Organization of the Petroleum Exporting Countries (OPEC) is located outside the headquarters prior to the OPEC and NON-OPEC meeting, Austria, 6 December 2019. REUTERS / Leonhard Foeger / File Photo

LONDON, December 2 (Reuters) – OPEC and its allies agreed on Thursday to stick to their existing policy of monthly oil production increases despite fears that a US release from crude oil reserves and the new Omicron coronavirus variant would lead to a new oil price route.

Benchmark Brent crude fell more than $ 1 after the trade was reported before regaining some ground to trade around $ 70 per barrel. barrel. It is now well below October’s three-year highs above $ 86, but still more than 30% higher in early 2021.

The United States has repeatedly pressured OPEC + to accelerate production increases as U.S. gas prices rose and President Joe Biden’s approval ratings fell. Faced with rejections, Washington said last week that it and other consumers would release reserves.

Fearing another supply surplus, sources said the Organization of the Petroleum Exporting Countries, Russia and allies, known as OPEC +, were considering a number of options in the negotiations on Thursday, including putting their January increase of 400,000 barrels a day (bpd) on pause. or increase production by less than the monthly plan.

But any such move would have put OPEC +, which includes Saudi Arabia and other US allies in the Gulf, on a collision course with Washington. Instead, the group rolled over its existing deal to increase production in January by 400,000 bpd.

“Politics wins over economics. Consumer countries have put enough pressure,” said veteran OPEC observer Gary Ross. “But weaker prices now will only mean stronger later.”

Prior to the talks, US Deputy Secretary of Energy David Turk indicated that there could be flexibility in the US release of reserves, and told Reuters on Wednesday that Biden’s administration could adjust the timing if oil prices fell significantly. Read more

OPEC + remains concerned that the COVID-19 pandemic could once again drive down demand. Increased infections have given rise to renewed restrictions in Europe, and the Omicron variant has already led to new restrictions on some international travel.

“We need to monitor the market closely to see the real impact of Omicron,” an OPEC + delegate said after the negotiations.

OPEC + ministers are the next scheduled meeting on January 4, but the group indicated in a statement that they could meet again before then if the market situation so requires.

Prior to this week’s negotiations, Saudi Arabia and Russia, the largest producers in OPEC +, had both said there was no need for a knee-jerk reaction.

Following the OPEC + decision, Russian Deputy Prime Minister Alexander Novak said the oil market was balanced and that global oil demand was slowly rising.

OPEC + has gradually phased out the record cuts agreed last year as demand grew due to the pandemic, reducing production by around 10 million bpd, or 10% of global supply. These cuts have since been scaled down to around 3.8 million bpd.

But OPEC + has regularly failed to reach its output targets and produces around 700,000 bpd less than planned in both September and October, says the International Energy Agency (IEA). Read more

The next meeting of the OPEC + Joint Technical Committee is scheduled for January 3, while the next meeting of the OPEC + Joint Ministerial Monitoring Committee is January 4, a source said.

Additional reporting by Vladimir Soldatkin; Writing by Dmitry Zhdannikov; Edited by Edmund Blair, Kirsten Donovan

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