Oil prices rose on Friday following the statement of OPEC+ that the producer group could revise its policy to increase output at short notice if the demand for oil collapsed owing to an increasing number of pandemic lockdowns.
Brent crude jumped $2.68 cents, or 3.9%, to $72.35 a barrel by 1442 GMT, even though it was still on course to drop for a sixth week in a row. US crude increased by $2.47, or 3.7%, to $68.97 a barrel.
The group known as the Organization of the Petroleum Exporting Countries, comprising Russia and allies, caused a stir in the market on Thursday when it decided to keep its plans to add 400,000 barrels per day (bpd) supply in January.
PVM said in a note, “Its decision to continue increasing monthly crude production is a vote of confidence in the near-term demand outlook. Better said, OPEC+ is banking on the new Omicron variant not having a lasting impact on oil demand”.
However, the producers left room for changing policy on an urgent basis if demand suffered from measures to curtail the spread of the Omicron coronavirus variant. They added that they could meet again before their next scheduled meeting on Jan. 4.
Commerzbank’s Carsten Fritsch said, “Brent has climbed to $71 per barrel, which puts it around $5 above yesterday’s daily low. So what is the explanation? OPEC+ said that it could reconsider yesterday’s decision at short notice if market conditions were to change”.
It must be noted that OPEC has struggled to follow through with its scheduled output increases.
Markets across assets have been roiled all week owing to the emergence of Omicron and speculation that it could lead to new lockdowns and reduce fuel demand.
The World Health Organization urged countries to vaccinate their people in order to fight the virus, saying travel restrictions were not a solution.
For the week, Brent was poised to end down nearly 0.5%, dipping lower for a sixth consecutive week for the first time since November 2018. WTI was headed for a weekly surge of around 1.4%, after five weekly drops.
JPMorgan analysts said the market fall implied an “excessive” hit to demand, while global mobility data, excluding China, showed that mobility is continuing to recover, averaging at 93% of 2019 levels last week.
JPMorgan analysts said in a note, “So far we see no signs of demand weakening on (a) global scale”.