Oil tumbles as OPEC+ sticks to planned production increase
Brent crude falls to four-month low
Oil prices tumbled to four-month lows on Thursday after the Organisation of the Petroleum Exporting Countries and its allies (OPEC+) announced that it would continue with the 400,000 barrels per day production increase it had planned for January.
The commodity has waxed and waned in the past week, as market sentiment wrestled with the potential implications of the Omicron variant of Covid-19.
When news of the new strain emerged last Friday, Brent crude futures suffered one of their largest slumps since the start of the Covid-19 crisis. The key international benchmark eventually fell below $70 per barrel as markets braced for a weakening of global fuel demand.
On Wednesday, however, prices staged a recovery in large part due to speculation that OPEC and its allies, including Russia, could delay their planned output increase.
Such hopes were dashed at the conclusion of the Vienna-based organisation’s Thursday meeting.
In a statement, the consortium reaffirmed its previous decision to raise overall production next month.
The announcement is likely to be welcomed by many governments unaffiliated with OPEC+. With oil prices recently hitting seven-year highs, the leaders of both the United States and Japan publicly called on the organisation to accelerate its planned easing of Covid-era production curbs.
The governments of the US, China, the UK, Japan and South Korea, among others, recently coordinated the release of strategic reserves in an effort to tackle high prices.
OPEC+ did give itself room to manoeuvre should the global coronavirus situation worsen, however.
In a rare occurrence, the members agreed that “the meeting shall remain in session pending further developments of the pandemic and continue to monitor the market closely and make immediate adjustments if required”.
By 17:30, spot Brent traded at $69.98 per barrel, having fallen as low as $66.33 per barrel.