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Oil producers face omicron doubt, rebellious customers

 

By Stanley Reed

© The New York Times Co.

One thing is certain when officials from OPEC, Russia and other oil-producing countries meet by teleconference Thursday to decide how much oil to produce in January they will want to try to make sure that last Friday’s sudden, sharp collapse in oil prices — a drop of more than 10% within a few hours, set off by reports of a threatening new COVID-19 variant — does not become a rout.

But the producers group, known as OPEC Plus, also must worry about the implications of the announcement last week that the United States and several other nations, including China, will release tens of millions of barrels of oil from their stockpiles, with the goal of bringing down what the White House called “elevated gas prices at the pump.”

Analysts said this move, which could put a surge of oil on the market early next year, amounts to a kind of rebellion against OPEC Plus by its customers.

The main question at the meeting will be whether the group proceeds with a plan to increase production in January by 400,000 barrels a day, part of a gradual buildup of supplies as economies around the world revive after pandemic lockdowns. But with the uncertainty over the new omicron variant and how to respond to President Joe Biden’s release of oil reserves, there is no clear indication which way the oil ministers will go.

Oil officials, particularly those representing Saudi Arabia, which leads the group, were fearful of the chance that prices could keep sliding after Friday’s tumble.

OPEC Plus has helped orchestrate a price rise of more than 50% this year through careful supply management, and its members will not want those gains to slip away.

Analysts say those worries may lead OPEC Plus to pause for a month or more the program to increase supplies each month. It could even decide to cut production, although that option seems unlikely.

Because it is too early to know what impact the omicron variant may have on the world economy, the easiest move may be to stick with the agreed-upon plan and wait until the group’s next meeting, in January.

Coupled with the impact of the new variant, prices are now down about 15% since late October.

 

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